Table of Contents
(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, 2023
☐ 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).
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.
Yes ☑
No ☐
Large Accelerated
Filer
Non-Accelerated Filer ☐
☑
Accelerated Filer
☐
Smaller Reporting Company ☐
Emerging Growth Company ☐
Table of Contents
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark 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, 2023 was approximately $3,362,424,057 based
upon the last sales price on June 30, 2023, on The NASDAQ Global Select MarketSM of $40.49 for the registrant’s Class A common stock and $45.37 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 61,517,252 shares Class A common stock and 16,364,153 shares of Class B common stock outstanding on February 14, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant’s definitive proxy statement for the registrant’s 2024 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission not later than 120 days after December 31, 2023, are incorporated by reference into Part III of this Form 10-K.
Table of Contents
RUSH ENTERPRISES, INC.
Index to Form 10-K
Year ended December 31, 2023
Part I
Part II
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
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 1
Item 1A
Item 1B
Item 1C
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
Item 15
Item 16
Exhibits, Financial Statement Schedules
Form 10-K Summary
Page No.
1
18
27
27
27
27
28
28
31
32
43
44
76
76
78
78
78
78
78
78
79
82
Table of Contents
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, Inc. International® is a registered
trademark of Navistar, Inc. 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. Dennis Eagle® is a registered
trademark of Dennis Eagle Limited. 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.
Table of Contents
PART I
Item 1. Business
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.
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, Blue Bird and Dennis Eagle. 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 14 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.
1
Table of Contents
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, 2024:
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
Russellville
California
Ceres
Fontana Heavy-Duty
Fontana Medium-Duty
Fontana Vocational
Long Beach
Los Angeles
San Diego
Sylmar
Ventura
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
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
Ford
Peterbilt
Peterbilt, Hino, Isuzu
None
Peterbilt
Peterbilt
Peterbilt, Hino, Ford
Peterbilt
Peterbilt
Peterbilt
Ford, Isuzu
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
2
Yes
Yes
No
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
No
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
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
Yes
No
No
No
No
Yes
Yes
No
No
Yes
No
No
No
Yes
No
No
No
No
No
No
Yes
No
No
Yes
No
No
No
No
No
No
No
No
No
No
Yes
No
No
No
No
No
No
No
No
Table of Contents
Rush Truck Center Location
Idaho
Boise
Idaho Falls
Lewiston
Twin Falls
Illinois
Bloomington
Carol Stream
Champaign
Chicago
Chicago Light and Medium Duty
Effingham
Elk Grove
Huntley
Joliet
Pontoon Beach
Quincy
Springfield
Indiana
Gary
Indianapolis
Kansas
Olathe
Salina
Topeka
Wichita
Kentucky
Bowling Green
Missouri
Cape Girardeau
Jefferson City
Joplin
Kansas City
Kansas City Used Trucks
St. Joseph
St. Peters
Springfield
Nevada
Las Vegas
New Mexico
Albuquerque
Farmington
Las Cruces
North Carolina
Asheville
Charlotte
Hickory
Ohio
Akron
Cincinnati
Cleveland
Columbus
Dayton
Lima
Commercial Vehicle
Franchise(s)
International, Hino, IC Bus
International, IC Bus
International
International
International, Hino
International
International
International
Ford
International
Hino, Isuzu
International
International
International, Dennis Eagle
International
International
International
International
Hino, Isuzu, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
Peterbilt
International, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
International, Dennis Eagle
None
International, Dennis Eagle
International, Dennis Eagle
International, Isuzu, 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
Truck
Sales
Parts
and
Service
Collision
Center
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
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
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
Yes
Yes
No
Yes
No
No
No
No
No
Yes
No
Yes
No
No
No
No
No
No
No
No
Yes
No
No
No
No
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
No
(1) Our Isuzu franchise is operated out of our Rush Truck Leasing - Columbus location.
3
Table of Contents
Rush Truck Center Location
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
Dallas Heavy-Duty
Dallas Medium-Duty
Dallas Light & Medium-Duty
Dallas South
Dallas TRP
El Paso
Fort Worth
Houston
Houston Medium-Duty
Laredo
Lubbock
Lufkin
Odessa
Pharr
San Antonio
Sealy
Texarkana
Tyler
Victoria
Waco
Wichita Falls
Commercial Vehicle
Franchise(s)
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
Peterbilt, Blue Bird, Micro Bird, Elkhart
Peterbilt, Hino, Blue Bird, Micro Bird, Elkhart
Ford, Isuzu
Peterbilt
None
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, 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, Blue Bird, Micro Bird
4
Truck
Sales
Parts
and
Service
Collision
Center
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
No
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
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
No
Yes
No
No
No
No
No
No
No
No
No
No
No
Yes
No
No
No
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
Yes
No
No
No
No
No
No
Table of Contents
Rush Truck Center Location
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)
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
Truck
Sales
Parts
and
Service
Collision
Center
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
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
Yes
Yes
Yes
Yes
No
Yes
No
No
No
Yes
No
No
Yes
No
No
No
No
No
No
No
No
No
No
No
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
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
Brand
PacLease
PacLease
Idealease
Idealease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
Idealease
Idealease
Idealease
5
Table of Contents
Rush Truck Leasing
Location
Illinois
Carol Stream
Chicago
Effingham
Huntley
Joliet
Springfield
Indiana
Indianapolis
Gary
Kansas
Kansas City
Salina
Wichita
Missouri
Joplin
St. Peters
Springfield
New Mexico
Albuquerque
Nevada
Las Vegas
North Carolina
Asheville
Charlotte
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
Ottawa
St. Catharines
Sudbury
Brand
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
PacLease
PacLease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
PacLease
Idealease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
PacLease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Idealease
Standalone or in a
Rush Truck Center
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
In RTC
Standalone
In RTC
In RTC
In RTC
Standalone
In RTC
Standalone
Standalone
Standalone
Standalone
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 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.
6
Table of Contents
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.
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, part sales, 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.
7
Table of Contents
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.
● 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 $2,562.0 million, or 32.3%,
of our total revenues for 2023, and 59.5% 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 $168.1 million, or
2.1%, of our total revenues for 2023. 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.
We also enter into contracts to provide full-service maintenance on certain customers’ vehicles. We had 3,246 vehicles under contract maintenance
as of December 31, 2023. 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
$4,543.3 million, or 57.3%, of our total revenues in 2023. Of this total, new Class 8 heavy-duty truck sales accounted for approximately $3,083.1 million,
or 38.9%, of our total revenues for 2023, and 67.9% of our new commercial vehicle revenues for 2023.
8
Table of Contents
Our Rush Truck Centers that sell new and used Class 8 heavy-duty trucks manufactured by Peterbilt, International or Dennis Eagle 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 $1,119.7 million, or 14.1%, of our total revenues for 2023, and 24.6% of our new
commercial vehicle revenues for 2023. New bus sales accounted for approximately $192.3 million, or 2.4%, of our total revenues for 2023, and 4.2% of
our new commercial vehicle revenues for 2023. New light-duty commercial vehicle sales accounted for approximately $108.8 million, or 1.4%, of our total
revenues for 2023, and 2.4% of our new commercial vehicle revenues for 2023.
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.
Used Commercial Vehicle Sales. Used commercial vehicle sales accounted for approximately $414.7 million, or 5.2%, of our total revenues for
2023. 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 $353.8 million, or 4.5%, of our total revenues for
2023. 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, 2023, we had 10,463 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
$24.3 million, or 0.3%, of our total revenues for 2023. 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. Most 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 an 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, workers’ compensation, cargo, and
credit life insurance coverage offered by several leading insurance companies. Our renewal rate in 2023 was approximately 81%. We also have licensed
insurance agents at several of our Rush Truck Centers.
Human Capital Management
On December 31, 2023, we employed 7,860 people in the U.S. and 649 people in Canada. Of these employees, less than 1.4% 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.
9
Table of Contents
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 a 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. Our 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 our work and dedication to our customers with positive intensity.
Each of these core values is embodied in our code of conduct, which we call our Rush Driving Principles. Employees are required to complete
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 that 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 the wide-ranging benefits we offer include: medical insurance, prescription drug benefits, dental insurance, vision
insurance, hospital indemnity insurance, accident insurance, critical illness insurance, smoking cessation assistance, 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.
Talent Development. Our talent development programs supply our employees and leaders with tools and experiences to foster learning, employee
engagement, leadership development, talent management, and employee development. Career development is fostered through education, learning
opportunities, succession planning, performance management, and training. Programs are designed to facilitate the development and advancement of talent
from within our organization to enable us to continuously fill our ranks with qualified employees for critical positions in the organization.
10
Table of Contents
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
implemented 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 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 Resilient Outstanding Women (“GROW”), which enables women to continue their professional development
through educational opportunities, mentoring and networking.
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.
Employee Experience. 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 use onboarding and exit survey feedback to monitor and improve
engagement and retention. We have formal “listening groups” that provide additional engagement channels for feedback from our dealerships to senior
management throughout the year. One of these groups is the Field Leadership Advisory Group (FLAG). FLAG consists of field employees nominated and
selected for their valuable experience. They provide regular feedback to executives to ensure that issues they are facing are handled in an efficient and
consistent manner and with the customer in mind.
Another aspect of the employee experience is our reward and recognition program, called STAR. Managers and employees may nominate a
colleague for superior work, outstanding effort, and demonstration of our company’s core values.
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 2023, our overall turnover rate for U.S. and Canada was 25.1%, compared to 28.6% in 2022. The
turnover rate of our technicians is also monitored closely by management, as the retention of skilled technicians is critical to the success of the Company.
Demand for technicians across the country is very high, and turnover in this role is also traditionally high for commercial vehicle dealers. In 2023, our
turnover rate for U.S. and Canada technicians was 33.6%, compared to 36.7% in 2022.
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.
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 2023, we had a TRIR of 3.68, compared to 4.03 in 2022 and a LTIR of .57 in
2023, compared to 0.72 in 2022.
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 2, 2027. We have the ratified terms
of an agreement covering certain employees in Chicago LMD, which once formalized, will expire on May 6, 2028. 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.
11
Table of Contents
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 2023, 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.
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 reducing overstock and understock. 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 December 4, 2023, we acquired certain assets of Freeway Ford Truck Sales, Inc., which included real estate and a Ford commercial vehicle
franchise in Chicago, Illinois, along with commercial vehicle and parts inventory. The transaction was valued at approximately $16.3 million, with the
purchase price paid in cash.
On 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.
12
Table of Contents
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.
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 July 2024. Our dealership
agreements with Peterbilt may be terminated by Peterbilt in the event that the aggregate voting power of W.M. “Rusty” Rush, and certain current and
former executives of the Company decreases below 22%. Sales of new Peterbilt commercial vehicles accounted for approximately 29.1% of our total
revenues for 2023.
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 2025 and January 2029. Sales of new International commercial vehicles accounted for approximately 16.4% of our total revenues
for 2023.
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 March 2024 and May 2029 and Ford, Hino, Isuzu and Dennis Eagle which have perpetual terms. Sales of new non‑Peterbilt and non-International
commercial vehicles accounted for approximately 8.5% of our total revenues for 2023.
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.
13
Table of Contents
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 to 60 days or less from the date the
commercial vehicles are invoiced from the factory. 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 finance the commercial vehicle under the Floor Plan Credit Agreement. 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. Prior to June 1, 2023, borrowings under the Floor Plan Credit Agreement bore
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 were payable monthly. On May 31, 2023, we entered into the First Amendment to the Floor Plan Credit Agreement
that changed the benchmark interest rate to Term secured overnight financing rate (“SOFR”), as defined in the amendment. Effective June 1, 2023,
borrowings under the Floor Plan Credit Agreement bear interest per annum, payable monthly, at (A) the greater of (i) zero and (ii) Term SOFR, plus (B)
1.20%. Borrowings 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, 2023, we had
approximately $984.4 million outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan Credit
Agreement were $870.1 million during the year ended December 31, 2023. 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 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. Prior to June 1, 2023, advances under the RTC Canada Floor Plan Agreement bore 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%. On June 1, 2023, RTC Canada entered into the First Amendment to the RTC Canada Floor Plan Agreement that changed the interest rate in the
case of an advance required to be made in USD dollars to Term SOFR, as defined in the first amendment. Effective June 1, 2023, advances required to be
made in USD dollars under the RTC Canada Floor Plan Agreement bear interest per annum, payable monthly, at Term SOFR, plus 1.20%. The RTC
Canada Floor Plan Agreement expires September 14, 2026. On December 31, 2023, we had approximately $55.9 million CAD outstanding under the RTC
Canada Floor Plan Agreement. 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.
Lease and Rental Fleet Financing
On September 14, 2021, we entered into a credit agreement (“WF 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”). Pursuant to the terms of the WF Credit
Agreement (as amended), the WF Lenders have agreed to make up to $175.0 million of revolving credit loans for certain of 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, 2026, although, upon the occurrence and during the
continuance of an event of default, the WF Agent has the right to, or upon the request of the required lenders must, terminate the commitments and declare
all outstanding principal and interest due and payable. We may terminate the commitments at any time. On December 31, 2023, we had approximately
$100.2 million outstanding under the WF Credit Agreement.
14
Table of Contents
On November 1, 2023, 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. In addition, we must maintain a minimum balance of $190.0 million. 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 1.95%, provided that the floating rate of interest is subject to a floor of
0%, or (B) a fixed rate, to be determined between us and PLC in each instance of borrowing at a fixed rate. The PLC Agreement expires on December 1,
2025, although either party has the right to terminate the PLC Agreement at any time upon 180 days written notice. On December 31, 2023, we had
approximately $265.0 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 CAD 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 the
CDOR, plus 1.35%. The RTC Canada Revolving Credit Agreement expires September 14, 2026. On December 31, 2023, we had approximately $64.7
million CAD 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.
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.”
15
Table of Contents
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, 2023, our backlog of commercial vehicle orders was approximately $3,733.4 million, compared to a backlog of commercial
vehicle orders of approximately $4,216.0 million on December 31, 2022. Our backlog is determined quarterly by multiplying the number of new
commercial vehicles for each 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 cancellations,
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, the demand for the particular model ordered and the status of the supply chain with respect to truck bodies and component parts.
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, 2023, and we
expect to fill the majority of our backlog orders during 2024, assuming that the manufacturers we represent can meet their current production schedule.
Given the potential for industry headwinds in the coming months caused by lower spot rates and high 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. In addition, given the current regulatory uncertainty in connection with the
California Air Resources Board’s (“CARB”) enforcement of its rules and regulations, we believe that certain commercial vehicle orders currently reflected
in our backlog could be canceled with respect to customers that intend to operate such vehicles in California.
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.
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.
16
Table of Contents
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, CARB adopted a final rule that is intended to phase out the sale of internal combustion engine 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 July 2023, CARB and various manufacturers of heavy-duty commercial vehicles and engines, including
PACCAR, Navistar, Ford, Hino, Isuzu and Cummins, entered into the Clean Truck Partnership, whereby the manufacturers agreed to comply with CARB’s
emission requirements where applicable, regardless of whether any entity challenges CARB’s rule-making authority, and CARB agreed to work with
manufacturers to provide reasonable lead time to meet CARB’s requirements and before imposing new regulations. In addition, CARB agreed to align its
nitrogen oxide emissions rules with the EPA’s, which go into effect starting in model year 2027, and modify certain of its 2024 nitrogen oxide emissions
regulations, currently in effect, with respect to which manufacturers may provide certain offsets to meet CARB's emission targets in exchange for the
ability to sell legacy engines. Since July 2020, a group of seventeen U.S. states and the District of Columbia have entered into a joint memorandum of
understanding that adopts at least a portion of CARB’s emissions regulations and commits each of them to work together to advance and accelerate the
market for electric Class 3 through 8 commercial vehicles. Six of the states 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, or CARB’s enforcement of its existing 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.
17
Table of Contents
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 2023, 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, emissions-compliant, 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 2023, 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, emissions-compliant, 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.
18
Table of Contents
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, Corey Lowe, Jody Pollard, Jason Wilder, Michael Goldstone, Mike
Eppes and Michael McRoberts, 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 41.6% of the aggregate voting power
with respect to the election of directors as of December 31, 2023); 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 or any
person who has been approved in writing by PACCAR, holds the office of Chairman of the Board and the 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 that 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 March 2024 and May 2029. 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.
19
Table of Contents
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.
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. 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 hailstorms) 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 our vehicle inventory is insured, we self-insure our property insurance with respect to the real property and
personal property (other than our vehicle inventory) that we own. Thus, we may be exposed to property losses that could have a material adverse effect on
our business, financial condition, results of operations or cash flows, although we believe that such a material adverse effect would be unlikely.
20
Table of Contents
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. In addition, 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.
The dollar amount of our backlog, as stated at any given time, is not necessarily indicative of our future earnings.
As of December 31, 2023, our backlog of new commercial vehicle orders was approximately $3,733.4 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.
Given the potential for industry headwinds in the coming months caused by low spot rates and high 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. In addition, given the current regulatory uncertainty in
connection with CARB’s rules and regulations, we believe that certain commercial vehicle orders currently reflected in our backlog could be cancelled with
respect to customers that intend to operate such vehicles in California.
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.
21
Table of Contents
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.
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, the
ability to manufacture or supply vehicles that comply with applicable emissions requirements, 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.
22
Table of Contents
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.
The commercial vehicles that we sell are subject to federal and state regulations focused on reducing engine emissions and we are dependent on the
manufacturers that we represent to produce or supply engines that comply with such regulations.
Laws and regulations intended to achieve the goal of significantly reducing engine emissions associated with the operation of commercial vehicles
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,
CARB 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
July 2023, CARB and various manufacturers of heavy-duty commercial vehicles and engines, including PACCAR, Navistar, Ford, Hino, Isuzu and
Cummins, entered into the Clean Truck Partnership, whereby the manufacturers agreed to comply with CARB’s emission requirements where applicable,
regardless of whether any entity challenges CARB’s rule-making authority, and CARB agreed to work with manufacturers to provide reasonable lead time
to meet CARB’s requirements and before imposing new regulations. In addition, CARB agreed to align its nitrogen oxide emissions rules with the EPA’s,
which go into effect starting in model year 2027, and modify certain of its 2024 nitrogen oxide emissions regulations, currently in effect, with respect to
which manufacturers may provide certain offsets to meet CARB's emmision targets in exhange for the ability to sell legacy engines.
Since July 2020, a group of seventeen U.S. states and the District of Columbia entered into a joint memorandum of understanding that adopts at
least a portion of CARB’s emissions regulations and commits each of them to work together to advance and accelerate the market for electric Class 3
through 8 commercial vehicles. 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 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.
In addition, engine emissions rules and regulations could affect demand for the products that we sell in certain markets. For example, there is
currently uncertainty regarding CARB’s regulations that became effective January 1, 2024. The regulations require a certain percentage of each
manufacturer’s commercial vehicles that are sold in California to be “zero-emission vehicles,” or “near-zero emission vehicles,” starting in model year
2024. There are currently multiple lawsuits pending where plaintiffs are challenging CARB’s rules on the basis that, amongst other things, such rules are
preempted by other federal laws and that the EPA exceeded its authority in granting a waiver allowing CARB’s rules to take effect. We are working with
the manufacturers we represent to understand the potential limitations on the sale of certain new commercial vehicles within California going forward, and
the potential limitations that may apply to our customers that may operate model year 2024 and later commercial vehicles within California. While we do
not currently believe that any reduction in the number of new commercial vehicles that we may be able to sell due to CARB’s rules and regulations would
have a material adverse effect on our results in 2024, our success going forward depends on the ability of our manufacturers to successfully supply new
commercial vehicles that comply with existing and future emissions rules and regulations in each of the markets in which we operate.
23
Table of Contents
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.
We take an enterprise-wide approach to cybersecurity, using established processes for assessing, identifying, and managing risks from
cybersecurity threats. We have implemented various measures across our organization to manage our cybersecurity risks, including implementing systems
to identify, prevent, detect, investigate, resolve, and recover from cyber security attacks. All employees participate in our security awareness training
program, and additional training is required for various roles within the organization. Employees are trained and encouraged to identify and report security
concerns, and cybersecurity is engrained in our culture. Our cybersecurity risk management program leverages the Center for Internet Security Critical
Security Framework to provide a structured methodology to help ensure the confidentiality, integrity, and availability of our systems and data. We regularly
assess cybersecurity risks and monitor our systems for vulnerabilities. We conduct regular reviews and tests of our systems and our cybersecurity program,
both internally and using consultants and external auditors. These tests include, but are not limited to, vulnerability testing, penetration testing, tabletop
exercises, systems recovery tests, assessments, and other activities to assess the readiness and effectiveness of our cybersecurity controls and protections.
However, 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. As
discussed above, 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.
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.
24
Table of Contents
We utilize a captive insurance company to manage our auto and general commercial liability insurance, which we supplement with excess
insurance coverage. We self-insure our property insurance with respect to the real property that we own and our personal property (excluding our vehicle
inventory, which is insured). We also maintain various insurance policies with third-party insurers, each of which are subject to deductibles with high dollar
amounts. 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 third-party 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 generally increasing our use of self-insurance programs and increasing the amounts of our deductibles.
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. In addition,
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.
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 43.7% of our
issued and outstanding Class B common stock. Mr. Rush collectively controls approximately 36.6% 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.
25
Table of Contents
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, 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, the restrictions on who may serve as Chairman of the Board and President or Chief Executive Officer of the Company,
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.
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, 2023, the three-month average
daily trading volume of our Class B common stock was approximately 20,330 shares, with 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.
26
Table of Contents
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We take an enterprise-wide approach to cybersecurity, using established processes for assessing, identifying, and managing risks from
cybersecurity threats. We have implemented various measures across our organization to manage our cybersecurity risks, including implementing systems
to identify, prevent, detect, investigate, resolve and recover from cyber security attacks. All employees participate in our security awareness training
program, and additional training is required for various roles within the organization. Employees are trained and encouraged to identify and report security
concerns, and cybersecurity is engrained in our culture.
Our cybersecurity risk management program leverages the Center for Internet Security Critical Security Framework to provide a structured
methodology to help ensure the confidentiality, integrity and availability of our systems and data. We regularly assess cybersecurity risks and monitor our
systems for vulnerabilities. We conduct regular reviews and tests of our systems and our cybersecurity program, both internally and using consultants and
external auditors. These tests include, but are not limited to, vulnerability testing, penetration testing, tabletop exercises, systems recovery tests,
assessments and other activities to assess the readiness and effectiveness of our cybersecurity controls and protections.
Our Information Security program is led by our Chief Information Officer (“CIO”), who reports to our Chief Operating Officer (“COO”). Our CIO
works with our Chief Privacy Officer (“CPO”) to address cybersecurity and data privacy risks and concerns. The Information Security Governance
Committee (“ISGC”), composed of executives from various corporate functions, oversees our cybersecurity policy and strategy. Our Board of Directors
(the “Board”) oversees our enterprise risk management activities in general, including cybersecurity risks. The Audit Committee of the Board has been
designated with specific oversight responsibility with respect to cybersecurity and data privacy risk management. The Board receives a comprehensive
update on the status of risks related to cybersecurity annually and periodic updates on particular matters. The COO and the ISGC meet with the CIO and
CPO on a regular basis to review and monitor our cybersecurity risks and mitigation efforts. We engage external assessors, consultants, and auditors to
assist us in evaluating and enhancing our cybersecurity risk management processes. We also have processes to oversee and identify such risks from
cybersecurity threats associated with our use of third-party service providers.
While we have not experienced a material breach, our systems are frequently the target of cyber security attacks intending to steal, misuse, or
destroy data, to impact our ability to do business, or otherwise negatively impact us. If we did experience a significant disruption in service, theft of data, or
other significant attack, it could result in legal claims or proceedings, liability under federal and state laws that protect the privacy of personal information,
regulatory penalties, remediation costs, increased cybersecurity costs, loss of revenue or customers, damage to our reputation or competitive position, or
other harm to our business. For more information regarding the risks we face from cybersecurity threats, please see “Risk Factors.”
Item 2. Properties
Our corporate headquarters are located in New Braunfels, Texas. As of December 2023, 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, 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 10,950 acres near
Cotulla, Texas, which is used for client development purposes.
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, 2023, 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.
27
Table of Contents
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 2023, our Board of
Directors approved four quarterly cash dividends on all outstanding shares of common stock totaling $0.62 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
2023
High
Low
Dividends
Declared
2022
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
$
$
.14 $
.14
.17
.17
.14 $
.14
.17
.17
41.47 $
41.32
46.30
50.42
43.73 $
45.93
50.05
53.11
33.44 $
33.37
38.85
34.68
35.43 $
36.57
42.54
39.81
.13 $
.13
.14
.14
.13 $
.13
.14
.14
40.59 $
36.25
35.33
36.71
38.67 $
35.17
40.01
38.84
31.56
31.15
28.48
29.43
29.82
29.45
31.25
32.31
As of February 2, 2024, there were approximately 18 record holders of Class A common stock and approximately 18 record holders of Class B
common stock. On August 28, 2023, we effected a three-for-two stock split with respect to both our Class A and Class B common stock in the form of a
Stock Dividend. The foregoing stock prices and the following share amounts have been adjusted to give retroactive effect to the stock split for all periods
presented.
As of December 31, 2023, we have not sold any securities in the last three years that were not registered under the Securities Act.
28
Table of Contents
A summary of our stock repurchase activity for the fourth quarter of 2023 is as follows:
Period
October 1 – October 31, 2023
November 1 – November 30, 2023
December 1 – December 31, 2023
Total
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)
555,284 $
341,834
1,553,738
2,450,856
39.77(4)
37.92(5)
43.49(6)
555,284 $
341,834
1,553,738
2,450,856
12,972,149
500
82,420,519
(1)
(2)
(3)
(4)
(5)
(6)
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 2023 under a stock repurchase program announced on December 2, 2022, which authorized the repurchase of up to
$150.0 million of our shares of Class A common stock and/or Class B common stock. This plan was terminated effective December 3, 2023; we
repurchased $150.0 million shares of our Class A and Class B common stock under the plan prior to its termination. On December 6, 2023, we
announced the approval of a new stock repurchase program, effective December 5, 2023, 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 456,837 shares of Class A common stock at an average price paid per share of $38.76 and 98,447 shares of Class B common stock at
an average price paid per share of $44.45.
Represents 315,220 shares of Class A common stock at an average price paid per share of $37.52 and 26,614 shares of Class B common stock at
an average price paid per share of $42.57.
Represents 53,566 shares of Class A common stock at an average price paid per share of $41.63 and 1,500,172 shares of Class B common stock at
an average price paid per share of $43.56.
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.
29
Table of Contents
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, 2018, and tracks it through December 31, 2023.
Rush Enterprises, Inc.
S&P 500
Peer Group
12/18
12/19
12/20
12/21
12/22
12/23
100.00
100.00
100.00
133.16
131.49
150.22
174.24
155.68
182.27
244.67
200.37
208.38
246.21
164.08
219.78
357.00
207.21
332.47
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.
30
Table of Contents
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.
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
2023
Year Ended December 31,
2022
(in thousands, except per share amounts)
2021
4,957,969 $
2,562,141
353,780
24,271
26,863
7,925,024
6,331,934
1,593,090
1,021,722
59,830
843
512,381
2,597
52,917
462,061
114,000
348,061
1,006
347,055 $
4.28 $
4.15 $
0.62 $
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 $
4.71 $
4.57 $
0.53 $
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
2.88
2.78
0.49
81,089
83,720
83,100
85,727
83,838
86,817
$
$
$
$
$
31
Table of Contents
OPERATING DATA
Unit vehicle sales −
New vehicles
Used vehicles
Total unit vehicles sales
Commercial vehicle lease and rental units
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
2023
Year Ended December 31,
2022
2021
32,569
7,117
39,686
10,463
29,842
7,078
36,920
10,326
23,259
7,527
30,786
8,914
2023
(in thousands)
Year Ended December 31,
2022
2021
$
586,994 $
1,801,447
4,364,241
1,139,744
414,002
133,736
1,890,416
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
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, Dennis Eagle, 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 59.5% of our total gross profits in 2023.
Stock Split
On July 25, 2023, the Board of Directors of the Company declared a 3-for-2 stock split of the Company’s Class A common stock and Class B
common stock, which was effected in the form of a stock dividend. On August 28, 2023, the Company distributed one additional share of stock for every
two shares of Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, held by shareholders of record as of
August 7, 2023. All share and per share data in this Form 10-K have been adjusted and restated to reflect the stock split as if it occurred on the first day of
the earliest period presented.
Summary of 2023
Our results of operations for the year ended December 31, 2023 are summarized below as follows:
● Our gross revenues totaled $7,925.0 million, a 11.6% increase from gross revenues of $7,101.7 million in 2022.
● Gross profit increased $105.9 million, or 7.1%, compared to 2022. Gross profit as a percentage of sales decreased to 20.1% in 2023, from
20.9% in 2022.
32
Table of Contents
● Our new Class 8 heavy-duty unit sales increased 4.0%, compared to 2022, which accounted for 6.2% of the total U.S. market and 2.0% of the
total Canadian market.
● Our new Class 4 through 7 medium-duty unit sales increased 20.3%, compared to 2022, including buses, which accounted for 5.1% of the
total U.S. market and 2.9% of the total Canadian market.
● New light-duty truck unit sales decreased 9.4% in 2023, compared to 2022.
● Used truck unit sales increased 0.6% in 2023, compared to 2022.
● Aftermarket Products and Services revenues increased $189.7 million, or 8.0% to $2,562.1 million, compared to $2,372.4 million in 2022.
● Lease and rental revenues increased $31.5 million, or 9.8%, to $353.8 million, compared to 2022.
● Selling, General and Administrative (“SG&A”) expenses increased $93.9 million, or 10.1%, to $1,021.7 million, compared to $927.8 million
in 2022.
● Net interest expense increased $33.8 million, or 176.7%, in 2023, compared to 2022.
2024 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 214,300 truck units in 2024, a 21.1% decrease compared to 271,607 units sold in 2023. We expect our U.S.
market share of new Class 8 truck sales to range between 6.3% and 6.8% in 2024. This market share percentage would result in the sale of approximately
13,500 to 14,500 new Class 8 trucks in 2024. We expect to sell approximately 650 additional new Class 8 trucks in Canada in 2024.
According to A.C.T. Research, new U. S. Class 4 through 7 commercial vehicle retail sales are estimated to total 254,250 units in 2024, a 0.6%
increase compared to 252,649 units sold in 2023. We expect our U.S. market share of new Class 4 through 7 commercial vehicle sales to range between
4.8% and 5.3% in 2024. This market share percentage would result in the sale of approximately 12,200 to 13,400 new Class 4 through 7 commercial
vehicles in 2024. We expect to sell approximately 350 additional new Class 5 through 7 commercial vehicles in Canada in 2024.
We expect to sell approximately 1,800 to 2,000 light-duty vehicles and approximately 6,500 to 7,500 used commercial vehicles in 2024.
We expect lease and rental revenue to increase approximately 3% during 2024, compared to 2023.
We believe our Aftermarket Products and Services revenues will increase 1% to 5% in 2024, compared to 2023. In 2024, we expect demand for
Aftermarket Products and Services in the first half of the year to be consistent with demand in the second half of 2023. We expect that challenging
economic conditions that are currently affecting many of our customers, including high interest rates and low freight rates, will continue to negatively
impact our Aftermarket Product and Services revenues through the first half of 2024. However, we are hopeful that the current freight recession may begin
to ease by late summer, which we believe could provide a tailwind to the aftermarket industry in the second half of 2024. During 2024, we will continue to
focus on our strategic initiatives, including supporting large national account customers and expanding our service technician workforce.
We expect that retail sales of new Class 8 trucks will decline compared to 2023, as pent-up demand in the market from the last few years has now
been largely met. Production of new Class 4 through 7 vehicles currently continues to increase and we believe that demand will likely be consistent with
2023, though delivery delays by truck body upfitters due to supply issues could negatively impact the timing of deliveries. In addition, we continue to
monitor inflation, interest rates and freight rates, which may negatively impact consumer spending and capital expenditures across a variety of industries
we support.
33
Table of Contents
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 135.3% absorption ratio for the year ended December 31, 2023, and 136.6% absorption ratio for the year ended December
31, 2022.
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.
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.
34
Table of Contents
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.
Results of Operations
The following discussion and analysis includes our historical results of operations for 2023, 2022 and 2021. 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 for income taxes
Net income
Net income attributable to noncontrolling interest
Net income attributable to Rush Enterprises, Inc.
2023
Year Ended December 31,
2022
2021
62.6%
32.3
4.5
0.3
0.3
100.0
79.9
20.1
12.9
0.7
0.0
6.5
0.0
0.7
5.8
1.4
4.4
0.0
4.4%
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%
35
Table of Contents
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):
% Change
2023
vs
2022
2022
vs
2021
4.0%
20.3
(9.4)
9.1%
51.8%
5.2
18.4
28.3%
0.6%
(6.0)%
13.5%
36.8
4.6
19.2%
63.4%
11.9
31.0
45.4%
28.5%
79.5%
5.2%
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)
$
$
$
$
2023
2022
2021
17,457
13,264
1,848
32,569
7,117
16,778
11,025
2,039
29,842
7,078
3,083.1
1,312.0
108.8
4,503.9
$
$
2,715.3
959.1
104.0
3,778.4
$
$
11,052
10,485
1,722
23,259
7,527
1,661.9
857.1
79.4
2,598.4
414.7
$
552.9
$
430.4
(25.0)%
39.4
$
20.1
$
11.2
96.0%
Dealership absorption ratio:
135.3%
136.6%
129.8%
(1.0)%
(1) Includes sales of truck bodies, trailers and other new equipment.
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
2023
2022
2021
30.4%
59.8
6.6
1.5
1.7
100.0%
27.9%
61.7
6.7
2.0
1.7
100.0%
27.7%
62.7
5.4
2.6
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.
36
Table of Contents
A.C.T. Research currently estimates approximately 214,300 new Class 8 trucks will be sold in the United States in 2024, compared to
approximately 271,607 new Class 8 trucks sold in 2023. A.C.T. Research currently forecasts sales of new Class 8 trucks in the U.S. to be approximately
249,000 in 2025.
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 254,250 units in 2024,
compared to 252,649 units in 2023. A.C.T. Research currently forecasts sales of new Class 4 through 7 commercial vehicles in the U.S. to be
approximately 268,750 in 2025.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Revenues
Total revenues increased $823.4 million, or 11.6%, in 2023, compared to 2022.
Our Aftermarket Products and Services revenues increased $189.7 million, or 8.0%, in 2023, compared to 2022. The increase in Aftermarket Parts
and Services revenues was primarily related to healthy demand for products and services during the first six months of 2023 and also related to the
consolidation of RTC Canada into our operating results for the full year in 2023.
Our revenues from sales of new and used commercial vehicles increased $606.6 million, or 13.9%, in 2023, compared to 2022. The increase in
new commercial vehicle revenues was primarily a result of strong demand and increased production of commercial vehicles from the manufacturers we
represent.
We sold 17,457 new Class 8 trucks in 2023, a 4.0% increase compared to 16,778 new heavy-duty trucks in 2022. Our share of the new U.S. Class
8 commercial vehicle sales market decreased to approximately 6.2% in 2023, from 6.3% in 2022. Our share of the new Canada Class 8 truck market was
approximately 2.0% in 2023. The increase in new Class 8 truck sales was primarily a result of strong demand and increased production of commercial
vehicles from the manufacturers we represent.
We sold 13,264 new medium-duty commercial vehicles, including 1,564 buses, in 2023, a 20.3% increase compared to 11,025 new medium-duty
commercial vehicles, including 1,237 buses, in 2022. In 2023, we achieved a 5.1% share of the Class 4 through 7 commercial vehicle market in the U.S.,
compared to 4.6% in 2022. Our share of the Canada medium-duty commercial vehicles market was approximately 2.9% in 2023. The increase in our Class
4 through 7 commercial vehicle sales in 2023 was primarily a result of strong demand and increased production of commercial vehicles from the
manufacturers we represent.
We sold 1,848 new light-duty vehicles in 2023, a 9.4% decrease compared to 2,039 new light-duty vehicles in 2022.
We sold 7,117 used commercial vehicles in 2023, an 0.6% increase compared to 7,078 used commercial vehicles in 2022. We expect used
commercial vehicle demand to remain at current levels. We expect that the rate at which used commercial vehicles are depreciating will continue to
decrease and that valuations will stabilize during 2024.
37
Table of Contents
Commercial vehicle lease and rental revenues increased $31.5 million, or 9.8%, in 2023, compared to 2022. This increase in commercial vehicle
lease and rental revenues was primarily a result of strong demand for lease commercial vehicles.
Finance and insurance revenues decreased $5.5 million, or 18.4%, in 2023, compared to 2022. This decrease is primarily due to the mix of
purchasers of commercial vehicles. During 2023, most of our sales were to larger fleets, which usually arrange their own financing and insurance. We are
more likely to provide financing to owner-operators and smaller fleets, which comprised a smaller percentage of commercial vehicle sales during 2023.
Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share of our operating profits.
Other revenues increased $1.0 million, or 3.9% in 2023, compared to 2022. Other revenues consist primarily of the gains related to the disposition
of our lease and rental fleet and document fees related to commercial vehicle sales.
Gross Profit
Gross profit increased $105.9 million, or 7.1%, compared to 2022. Gross profit as a percentage of sales decreased to 20.1% in 2023, from 20.9%
in 2022. 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 62.6% in 2023, from 61.3% in 2022. Aftermarket Products and Services revenues, a higher
margin revenue item, decreased as a percentage of total revenues to 32.3% in 2023, from 33.4% in 2022.
Gross margins from our Aftermarket Products and Services operations decreased to 37.2% in 2023, from 38.6% in 2022. This decrease is
primarily related to continued stabilization of parts pricing and softening demand due to difficult economic conditions impacting many of our customers,
especially our over-the-road customers. Gross profit for Aftermarket Products and Services increased to $952.8 million in 2023, from $916.8 million in
2022. This increase is primarily related strong parts and service demand in the first six months of 2023 and also related to the consolidation of RTC Canada
into our operating results for twelve months in 2023. 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 59.5% of total gross profit for Aftermarket Products and Services operations
in 2023 and 62.8% in 2022. Service and collision center operations represented 40.5% of total gross profit for Aftermarket Products and Services
operations in 2023 and 37.2% 2022. We expect blended gross margins on Aftermarket Products and Services operations to range from 36.0% to 38.0% in
2024.
Gross margins on new Class 8 truck sales decreased to 9.7% in 2023, from 9.9% in 2022. In 2024, we expect overall gross margins from new
heavy-duty truck sales of approximately 8.5% to 9.5%.
Gross margins on new Class 4 through 7 commercial vehicle sales increased to 9.0% in 2023, from 8.1% in 2022. This increase was primarily due
to the mix of purchasers during 2023. For 2024, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately 8.0%
to 9.0%, but this will largely depend upon the mix of purchasers and types of vehicles sold.
Gross margins on used commercial vehicle sales increased to 12.4% in 2023, from 9.9% in 2022. This increase was primarily due to the strategic
inventory management of our used commercial vehicle inventory. We expect margins on used commercial vehicles to range between 8.0% and 10.0% in
2024.
Gross margins from commercial vehicle lease and rental sales decreased to 29.9% in 2023, from 31.2% in 2022. This decrease is primarily related
to a decrease in rental utilization rates and increased maintenance costs for the lease and rental fleet. We expect gross margins from lease and rental sales of
approximately 29.0% to 31.0% during 2024. 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.
38
Table of Contents
Selling, General and Administrative Expenses
SG&A expenses increased $93.9 million, or 10.1%, in 2023, compared to 2022. This increase primarily resulted from increased personnel
expense, increased selling expense and the consolidation of RTC Canada into our operating results for twelve months in 2023. SG&A expenses as a
percentage of total revenues decreased to 12.9% in 2023, from 13.0% in 2022. Annual SG&A expenses as a percentage of total revenues have ranged from
approximately 12.4% to 14.4% 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 2024, we expect SG&A expenses as a percentage of
total revenues to range from 13.0% to 14.0%. For 2024, 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 $4.2 million, or 7.5%, in 2023, compared to 2022.
Interest Expense, Net
Net interest expense increased $33.8 million, or 176.7%, in 2023, compared to 2022. 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 2022. We expect net interest expense in 2024, compared to 2023, to increase
due to interest related to our working capital lines of credit 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 decreased $47.3 million, or 9.3%, in 2023, compared to 2022, as a result of the factors described above.
Income Taxes
Income tax expense decreased $3.2 million, or 2.8%, in 2023, compared to 2022, as a result of the factors described above. We provided for taxes
at a 24.7% effective rate in 2023 and 23.0% in 2022. We expect our effective tax rate to be approximately 24.0% to 25.0% of pretax income in 2024.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
For a discussion of information on the year ended December 31, 2022, refer to Part II Item 7 in the 2022 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, 2023, we had working capital of approximately $587.0 million, including $183.7 million in
cash, available to fund our operations. We believe that these funds, together with expected cash flows from operations, are sufficient to meet our operating
requirements for at least the next twelve months. From time to time, we utilize our excess cash on hand to pay down our outstanding borrowings under our
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.
39
Table of Contents
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 as of December 31, 2023, however, $17.9 million was pledged to secure various letters of credit related to self-insurance products, leaving $2.1
million available for future borrowings as of December 31, 2023.
Our 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, 2023, 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 $200.0 million to $225.0 million for our leasing operations during 2024,
depending on customer demand. 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 2024.
During the fourth quarter of 2023, we paid a cash dividend of $13.5 million. Additionally, on February 13, 2024, our Board of Directors declared a
cash dividend of $0.17 per share of Class A and Class B common stock, to be paid on March 18, 2024, to all shareholders of record as of February 27,
2024. The total dividend disbursement is estimated to be approximately $13.2 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 5, 2023, 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, 2023.
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, 2023, we had repurchased $65.3 million of our shares of common stock under the current stock repurchase program. The current stock
repurchase program expires on December 31, 2024, 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, 2023. 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.
40
Table of Contents
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 (decrease) increase in cash
Cash Flows from Operating Activities
2023
Year Ended December 31,
2022
2021
$
$
295,713 $
(387,030)
73,962
36
(17,319) $
294,400 $
(240,930)
(690)
118
52,898 $
422,346
(432,905)
(153,343)
−
(163,902)
Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. During 2023,
operating activities resulted in net cash provided by operations of $295.7 million. Net cash provided by operating activities primarily consisted of $348.1
million in net income, as well as non-cash adjustments related to depreciation and amortization of $221.1 million, provision for deferred income tax of $7.6
million and stock-based compensation of $30.4 million. Cash used in operating activities included an aggregate of $310.6 million net change in operating
assets and liabilities. Included in the net change in operating assets and liabilities were primarily the result of $28.8 million from the decrease in customer
deposits and $7.2 million from the decrease in accrued liabilities which were offset primarily by cash outflows of $38.3 million from an increase in
accounts receivable, $10.6 million from the decrease in accounts payable and $297.7 million from an increase in inventory. The majority of commercial
vehicle inventory is financed through our floor plan credit agreements.
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.
Cash Flows from Investing Activities
During 2023, cash used in investing activities totaled $387.0 million. Cash flows used in investing activities consist primarily of cash used for
capital expenditures and business acquisitions. Cash used for business acquisitions was $16.1 million during the year ended December 31,2023. See Note
15 of the Notes to Consolidated Financial Statements for a detailed discussion of the business acquisitions. Capital expenditures totaled $368.9 million
during 2023 and consisted primarily of purchases of property and equipment, improvements to our existing dealership facilities and $263.9 million for
purchases of rental and lease vehicles for the rental and leasing operations.
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.
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
2023, our financing activities resulted in net cash received in financing of $74.0 million. The cash outflows consisted primarily of $1,309.3 million used for
principal repayments of long-term debt and finance lease obligations and $7.0 million for taxes paid related to net share settlement of equity awards.
Additionally, during 2023, we paid cash dividends of $50.6 million and used $211.8 million to repurchase shares of Rush Class A common stock and Rush
Class B common stock. These cash outflows were partially offset by $205.5 million from net draws on floor plan notes payable (non-trade), borrowings of
$1,429.1 million of long-term debt and $18.1 million from the issuance of shares related to equity compensation plans.
41
Table of Contents
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.
On September 14, 2021, we entered into the WF Credit Agreement with the WF lenders and the WF Agent. Pursuant to the terms of the WF
Credit Agreement (as amended), the WF Lenders have agreed to make up to $175.0 million of revolving credit loans for certain of 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, 2026, although, upon the occurrence and during the
continuance of an event of default, the WF Agent has the right to, or upon the request of the required lenders must, terminate the commitments and declare
all outstanding principal and interest due and payable. We may terminate the commitments at any time. On December 31, 2023, we had approximately
$100.2 million outstanding under the WF Credit Agreement.
On November 1, 2023, 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. In addition, we must maintain a minimum
balance of $190.0 million. 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 1.95%, provided that the floating rate of interest is subject to a floor of 0%, or (B) a fixed rate, to be determined between us
and PLC in each instance of borrowing at a fixed rate. The PLC Agreement expires on December 1, 2025, although either party has the right to terminate
the PLC Agreement at any time upon 180 days written notice. On December 31, 2023, we had approximately $265.0 million outstanding under the PLC
Agreement.
Most of our commercial vehicle purchases are made on terms requiring payment to the manufacturer within 15 to 60 days or less from the date the
commercial vehicles are invoiced from the factory. 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 finance the commercial vehicle under the Floor Plan Credit Agreement. 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.
Prior to June 1, 2023, borrowings under the Floor Plan Credit Agreement bore interest at an annual rate equal to (A) the greater of (i) zero and (ii) one
month LIBOR, determined on the last day of the prior month, plus (B) 1.10% and were payable monthly. On May 31, 2023, we entered into the First
Amendment to the Floor Plan Credit Agreement that changed the benchmark interest rate to Term SOFR, as defined in the amendment. Effective June 1,
2023, borrowings under the Floor Plan Credit Agreement bear interest per annum, payable monthly, at (A) the greater of (i) zero and (ii) Term SOFR, plus
(B) 1.20%. Borrowings 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, 2023, we
had approximately $984.4 million outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan
Credit Agreement were $870.1 million during the twelve months ended December 31, 2023. 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.
42
Table of Contents
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, 2023, we had approximately $64.7 million CAD 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. Prior to June 1, 2023, advances under the RTC Canada Floor Plan Agreement bore 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%. On June 1, 2023, RTC Canada entered into the First Amendment to the RTC Canada Floor Plan Agreement that changed the interest
rate in the case of an advance required to be made in USD dollars to Term SOFR, as defined in the amendment. Effective June 1, 2023, advances required
to be made in USD dollars under the RTC Canada Floor Plan Agreement bear interest per annum, payable monthly, at Term SOFR, plus 1.20%. The RTC
Canada Floor Plan Agreement expires September 14, 2026. On December 31, 2023, we had approximately $55.9 million CAD outstanding under the RTC
Canada Floor Plan Agreement. We utilize our excess cash on hand to pay down our outstanding borrowings under the Floor Plan Credit Agreement, and the
resulting interest earned is recognized as an offset to our gross interest expense under the Floor Plan Credit Agreement.
Navistar Financial Corporation and Peterbilt offer trade terms that provide an interest-free 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, freight rates, 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.
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 SOFR 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, 2023, we had outstanding floor plan borrowings and lease and rental fleet borrowings in the aggregate amount of $1,553.7
million. Assuming an increase or decrease in SOFR, CDOR or the prime rate of 100 basis points, annual interest expense could correspondingly increase or
decrease by approximately $15.5 million.
43
Table of Contents
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Income for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
44
45
47
48
49
50
51
52
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Rush Enterprises, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Rush Enterprises, Inc. and subsidiaries (the Company) as of December 31, 2023 and
2022, 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, 2023, 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, 2023 and 2022, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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, 2024 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
45
Table of Contents
Description of the
Matter
Used Commercial Vehicle Inventory Reserves
At December 31, 2023, the Company’s used commercial vehicle inventory balance is approximately $45 million, which is net of
management’s estimate of used commercial vehicle inventory reserves in the amount of approximately $5 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.
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. 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, 2024
46
Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares and Per Share Amounts)
December 31,
2023
December 31,
2022
Assets
Current assets:
Cash, cash equivalents and restricted cash
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
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 2023 and
2022
Common stock, par value $.01 per share; 105,000,000 Class A shares and 35,000,000 Class B shares
authorized; 61,461,281 Class A shares and 16,364,158 Class B shares outstanding in 2023; and
63,518,042 Class A shares and 18,124,627 Class B shares outstanding in 2022
Additional paid-in capital
Treasury stock, at cost: 1,092,142 Class A shares and 1,731,157 Class B shares in 2023; and 1,626,777
Class A shares and 1,112,446 Class B shares in 2022
Retained earnings
Accumulated other comprehensive (loss)
Total Rush Enterprises, Inc. shareholders’ equity
Noncontrolling interest
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
$
$
$
183,725 $
259,353
1,801,447
15,779
2,260,304
1,488,086
120,162
420,708
74,981
4,364,241 $
1,139,744 $
36,119
17,438
162,134
145,326
172,549
1,673,310
414,002
97,617
104,514
24,811
159,571
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
−
−
806
542,046
(119,835)
1,450,025
(2,163)
1,870,879
19,537
1,890,416
4,364,241 $
572
500,642
(130,930)
1,378,337
(4,130)
1,744,491
18,531
1,763,022
3,821,066
The accompanying notes are an integral part of these consolidated financial statements.
47
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
Total interest expense, net
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
2023
Year Ended December 31,
2022
2021
4,957,969 $
2,562,141
353,780
24,271
26,863
7,925,024
4,474,616
1,609,383
247,935
6,331,934
1,593,090
1,021,722
59,830
843
512,381
2,597
777
(53,694)
(52,917)
462,061
114,000
348,061
1,006
347,055 $
4.28 $
4.15 $
0.62 $
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 $
4.71 $
4.57 $
0.49 $
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
2.88
2.78
0.27
$
$
$
$
$
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.
48
Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Net income
Other comprehensive income (loss), net of tax:
2023
2022
2021
$
348,061 $
392,085 $
241,415
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.
$
$
1,967
-
1,967
350,028 $
1,006
349,022 $
(4,316)
(601)
(4,917)
387,168 $
703
386,465 $
(82)
-
(82)
241,333
-
241,333
The accompanying notes are an integral part of these consolidated financial statements.
49
Table of Contents
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
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
Retirement of treasury shares and
par value adjustment
Cash dividends declared on Class
A common stock
Cash dividends declared on Class
B common stock
Foreign currency translation
adjustment
Net income
Balance, December 31, 2023
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In Thousands)
Common Stock
Shares
Outstanding
Class A Class B
$0.01
Par
Value
Additional
Paid -In
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Rush
Enterprises,
Inc.
Shareholders’
Equity
Noncontrolling
Interest
Total
Shareholders’
Equity
63,756
18,705
$
551 $ 437,646
$
(2,879) $
831,850
$
869
$
1,268,037
–
$
1,268,037
1,176
–
8
14,157
–
–
–
520
224
(494)
–
(627)
–
–
–
–
–
3
1
–
–
–
22,246
(7,447)
4,148
–
–
–
64,662
18,598
$
563 $ 470,750
$
585
–
4
8,029
–
–
–
457
201
(1,930)
–
(930)
–
–
–
–
–
–
–
3
2
–
–
–
–
25,315
(8,669)
5,217
–
–
–
–
–
–
–
–
(34,054)
–
–
–
–
–
(31,816)
–
–
(9,867)
–
241,415
(36,933) $ 1,031,582
$
–
–
–
–
–
(34,207)
(10,420)
–
–
–
–
(93,997)
–
–
–
–
–
–
–
–
–
14,165
22,246
(7,444)
4,149
(34,054)
(31,816)
–
(82)
–
787
$
(9,867)
(82)
241,415
1,466,749
–
–
–
–
–
–
–
8,033
25,315
(8,666)
5,219
(93,997)
(34,207)
(10,420)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,165
22,246
(7,444)
4,149
(34,054)
(31,816)
(9,867)
(82)
241,415
1,466,749
8,033
$
25,315
(8,666)
5,219
(93,997)
(34,207)
(10,420)
(601)
–
(601)
(601)
–
–
–
63,518
–
–
–
18,125
$
–
–
–
–
–
–
572 $ 500,642
–
–
391,382
$ (130,930) $ 1,378,337
–
–
–
$
(4,316)
–
–
(4,130) $
(4,316)
–
391,382
1,744,491
$
–
17,828
703
18,531
$
(4,316)
17,828
392,085
1,763,022
822
–
6
12,120
–
–
–
421
209
(3,088)
–
(2,182)
–
3
1
–
30,354
(7,018)
5,951
–
–
–
–
–
(213,425)
–
–
–
–
–
–
–
–
–
–
–
224
(3)
224,520
(224,744)
–
–
–
–
–
–
(38,727)
(11,896)
–
–
–
–
–
–
–
12,126
30,354
(7,015)
5,952
(213,425)
(3)
(38,727)
(11,896)
–
–
–
–
–
–
–
12,126
30,354
(7,015)
5,952
(213,425)
(3)
(38,727)
(11,896)
–
–
61,461
–
–
16,364
$
–
–
–
–
806 $ 542,046
–
347,055
$ (119,835) $ 1,450,025
–
–
$
1,967
–
(2,163) $
1,967
347,055
1,870,879
$
–
1,006
19,537
$
1,967
348,061
1,890,416
The accompanying notes are an integral part of these consolidated financial statements.
50
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 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
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:
stock purchases
Taxes paid related to net share settlement of equity awards
Payments of cash dividends
Common stock repurchased
Net cash provided by (used in) financing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
Effect of exchange rate on cash
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, 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
$
$
$
$
2023
Year Ended December 31,
2022
2021
348,061 $
392,085 $
241,415
221,141
(843)
-
-
30,354
7,601
(38,307)
(297,678)
862
(10,629)
28,803
7,198
(850)
295,713
(368,881)
2,212
-
(16,050)
(4,311)
(387,030)
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)
18,077
(7,017)
(50,582)
(211,778)
73,962
(17,355)
36
201,044
183,725 $
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
56,427 $
106,872 $
21,694 $
102,038 $
22,224
101,987
43,330 $
33,654 $
29,044
Draws 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
205,487
1,429,083
(1,291,615)
(17,693)
273,906
958,328
(1,084,465)
(14,780)
The accompanying notes are an integral part of these consolidated financial statements.
51
Table of Contents
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND OPERATIONS:
Rush Enterprises, Inc. (the “Company”) was incorporated in 1965 under the laws of the State of Texas. The Company operates a network of commercial
vehicle dealerships that primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, IC Bus, Blue Bird or Dennis Eagle.
Through its strategically located network of Rush Truck Centers, the Company provides one-stop service for the needs of its commercial vehicle customers,
including retail sales of new and used commercial vehicles, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance
products.
Restricted Cash
Restricted cash consists of deposits for the statutory restriction on cash related to the Company’s captive insurance company of $2.8 million as of
December 31, 2023.
Stock Split
On July 25, 2023, the Board of Directors of the Company declared a 3-for-2 stock split of the Company’s Class A common stock and Class B common
stock, which was effected in the form of a stock dividend. On August 28, 2023, the Company distributed one additional share of stock for every two shares
of Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, held by shareholders of record as of August 7,
2023. All share and per share data in this Form 10-K have been adjusted and restated to reflect the stock split as if it occurred on the first day of the earliest
period presented.
Authorized Shares
On May 16, 2023, the Company’s shareholders approved the Certificate of Amendment to the Restated Articles of Incorporation of the Company to
increase the number of authorized shares of Class A Common Stock from 60,000,000 to 105,000,000 and Class B Common Stock from 20,000,000 to
35,000,000.
Treasury Stock Retirement
During the third quarter of 2023, the Company retired 3,052,899 shares of Class A common stock and 1,445,515 shares of Class B common stock. The
Company recorded the retirement directly against retained earnings based on the Company’s policy election. The Company accounts for treasury stock
using the cost method. There was no effect on the Company’s overall equity position due to the retirement of the treasury shares.
Foreign Currency Transactions
The functional currency of the Company’s foreign subsidiary, Rush Truck Centres of Canada Limited (“RTC Canada”), is the local currency, the Canadian
dollar. Results of operations for RTC Canada are translated to USD using the average exchange rate 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).
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.
52
Table of Contents
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents generally consist of cash and other money market instruments. The Company considers all highly liquid investments with an
original maturity of ninety days or less to be cash equivalents. Restricted cash consists of deposits for the statutory restriction on cash related to the
Company’s captive insurance company.
Allowance for Credit Losses and Repossession Losses
The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging and current economic
conditions. Accounts receivables consist primarily of commercial vehicle sales receivables, manufacturers’ receivables, leasing and parts and service
receivables and other trade receivables. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that
the likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.
The Company provides an allowance for repossession losses after considering historical loss experience and other factors that might affect the ability of
customers to meet their obligations on finance contracts sold by the Company when the Company has a potential liability.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by specific identification of new and used commercial vehicle
inventory 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. In 2023, the Company capitalized $0.7
million in interest. 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
$
2023
2022
172,396 $
591,992
43,088
105,544
111,242
135,425
1,155,767
31,037
(858,405)
162,641
570,595
42,236
96,584
98,609
116,327
1,067,006
14,585
(799,989)
Estimated Life
(Years)
10 – 39
2 – 39
5 – 20
3 – 15
3 – 15
1 – 8
Total
$
1,488,086 $
1,368,594
The Company recorded depreciation expense of $194.1 million and amortization expense of $27.0 million for the year ended December 31, 2023,
depreciation expense of $177.1 million and amortization expense of $22.1 million for the year ended December 31, 2022, and depreciation expense of
$148.3 million and amortization expense of $21.2 million for the year ended December 31, 2021.
53
Table of Contents
As of December 31, 2023, the Company had $125.7 million in lease and rental vehicles under various finance leases included in property and equipment,
net of accumulated amortization of $58.9 million. The Company recorded depreciation and amortization expense of $161.3 million related to lease and
rental vehicles in lease and rental cost of products sold for the year ended December 31, 2023, $143.5 million for the year ended December 31, 2022 and
$116.1 million for the year ended December 31, 2021.
Purchase Price Allocation, Intangible Assets and Goodwill
The Company uses the acquisition method of accounting for the recognition of assets acquired and liabilities assumed through acquisitions at their
estimated fair values as of the date of acquisition. The purchase price allocation for business combinations and asset acquisitions requires the use of
accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based
on their respective fair values. As a result, during the measurement period, which is not to exceed one year from the date of acquisition, any changes in the
estimated fair values of the net assets recorded for the acquisitions will result in an adjustment to goodwill. Upon the conclusion of the measurement period
or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the
Consolidated Statements of Income.
The Company determines whether substantially all the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of
similar identifiable assets. If so, the single asset or group of assets, as applicable, is not a business. If not, the Company determines whether the single asset
or group of assets, as applicable, meets the definition of a business.
In connection with the Company’s business combinations, it records certain intangible assets, including franchise rights. The Company periodically reviews
the estimated useful lives and fair values of its identifiable intangible assets, taking into consideration any events or circumstances that might result in a
diminished fair value or revised useful life. See Note 15 – Acquisitions in the Notes to the Financial Statements for further discussion.
Goodwill represents the excess, at the date of acquisition, of the purchase price of an acquired business over the fair value of the net tangible and intangible
assets acquired. In addition to goodwill, the Company recognizes separately identifiable intangible assets for rights under franchise agreements with
manufacturers.
The fair value of the intangible franchise right is determined at the acquisition date by discounting the projected cash flows specific to each acquisition. The
carrying value of the Company’s manufacturer franchise rights was $12.3 million as of December 31, 2023 and December 31, 2022, 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 2023, 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, 2023, 2022 and 2021.
54
Table of Contents
The following table sets forth the change in the carrying amount of goodwill for the Company for the year ended December 31, 2023 (in thousands):
Balance December 31, 2022
Acquisitions during 2023
Currency translation
Balance December 31, 2023
Equity Method Investments
$
$
416,363
3,250
1,095
420,708
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.
On January 3, 2022, a subsidiary of Cummins, Inc. acquired a 50% equity interest in Natural Gas Fuel Systems, LLC (“NGFS”) from the Company for
$27.5 million. NGFS previously conducted business as Momentum Fuel Technologies. The $12.5 million gain realized on the transaction is included in
Other income on the Consolidated Statements of Income for the year ended December 31, 2022. The Company is accounting for the business as a joint
venture and recognizes the investment using the equity method. The Company’s equity income in NGFS is included in the line item Other income on the
Consolidated Statements of Income.
Income Taxes
Management’s judgment is required to determine the provisions for income taxes and to determine whether deferred tax assets will be realized in full or in
part. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. When it is more likely than not that all or some portion of specific deferred income tax assets
will not be realized, a valuation allowance must be established for the amount of deferred income tax assets that are determined not to be realizable.
Accordingly, the facts and financial circumstances impacting deferred income tax assets are reviewed quarterly and management’s judgment is applied to
determine the amount of valuation allowance required, if any, in any given period.
In determining its provision for income taxes, the Company uses an annual effective income tax rate based on annual income, permanent differences
between book and tax income, and statutory income tax rates. The effective income tax rate also reflects its assessment of the ultimate outcome of tax
audits. The Company adjusts its annual effective income tax rate as additional information on outcomes or events becomes available. Discrete events such
as audit settlements or changes in tax laws are recognized in the period in which they occur.
The Company’s income tax returns are periodically audited by tax authorities. These audits include questions regarding the Company’s tax filing positions,
including the timing and amount of deductions. In evaluating the exposures associated with its various tax filing positions, the Company adjusts its liability
for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations
expires for the relevant taxing authority to examine the tax position or when more information becomes available.
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.
55
Table of Contents
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.
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.
56
Table of Contents
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 subjective variables. These variables include the Company’s expected stock price
volatility over the term of the awards and actual and projected stock option exercise behaviors. Option-pricing models were developed for use in estimating
the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s stock options have characteristics
that are significantly different from traded options and because changes in the subjective assumptions can materially affect the estimated value, in
management’s opinion, the existing valuation models may not provide an accurate measure of fair value and it may not be indicative of the fair value
observed in a market transaction between a willing buyer and a willing seller.
The following table reflects the weighted-average fair value of stock options granted during each period using the Black-Scholes option valuation model
with the following weighted-average assumptions used:
Weighted-average stock volatility
Expected dividend yield
Risk-free interest rate
Expected life (years)
Weighted-average fair value of stock options granted
$
2023
2022
2021
34.60%
1.54%
3.58%
6.0
11.82
$
34.97%
1.44%
2.13%
6.0
11.21
$
36.03%
1.65%
1.07%
6.0
9.85
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 $10.0 million for 2023, $8.7 million for 2022 and $7.5 million for
2021. 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 $3.0
million as of December 31, 2023, net of accumulated amortization of $16.0 million, and had $4.2 million as of December 31, 2022, net of accumulated
amortization of $14.9 million.
Insurance
The Company utilizes a captive insurance company to manage its auto and general commercial liability insurance, which the Company supplements with
excess insurance coverage at a level management believes is sufficient. The Company is partially self-insured for a portion of the claims related to its
worker’s compensation, medical insurance and vehicle inventory. The Company uses actuarial information provided from third-party administrators to
calculate an accrual for claims incurred, but not reported, and for the remaining portion of claims that have been reported. The Company is fully self-
insured for claims related to its real and personal property (except for its vehicle inventor, as noted above).
57
Table of Contents
Fair Value Measurements
The Company has various financial instruments that it must measure at fair value on a recurring basis. See Note 9 – Financial Instruments and Fair Value of
the Notes to Consolidated Financial Statements, for further information. The Company also applies the provisions of fair value measurement to various
nonrecurring measurements for its financial and nonfinancial assets and liabilities.
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (an exit price). The Company measures its assets and liabilities using inputs from the following three
levels of the fair value hierarchy:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement
date.
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are
derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 includes unobservable inputs that reflect the Company’s assumptions about what factors market participants would use in pricing the asset or
liability. The Company develops these inputs based on the best information available, including its own data.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued updated accounting guidance related to annual and interim segment
disclosures. The updated accounting guidance, among other things, requires disclosure of certain significant segment expenses. The Company will adopt
the updated accounting guidance in its Annual Report on Form 10-K for the year ended December 31, 2024. The Company is currently evaluating the
impact the adoption of the new accounting guidance will have on its segment disclosures in Note 16.
In December 2023, the FASB issued updated accounting guidance related to income tax disclosures. The updated accounting guidance, among other things,
requires additional disclosure primarily related to the income tax rate reconciliation and income taxes paid. The Company will adopt the updated
accounting guidance in its Annual Report on Form 10-K for the year ended December 31, 2025. The Company is currently evaluating the impact the
adoption of the new accounting guidance will have on its income tax disclosures in Note 13.
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
Dennis Eagle
Expiration Dates
July 2024
May 2025 through January 2029
Indefinite
Indefinite
Indefinite
August 2024
May 2025 through December 2027
Indefinite
These agreements, as well as agreements with various other Manufacturers, impose a number of restrictions and obligations on the Company, including
restrictions on a change in control of the Company and the maintenance of certain required levels of working capital. Violation of these restrictions could
result in the loss of the Company’s right to purchase the Manufacturers’ products and use the Manufacturers’ trademarks.
58
Table of Contents
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 50.7%
of the Company’s new vehicle sales revenue for the year ended December 31, 2023, 59.6% of the Company’s new vehicle sales revenue for the year ended
December 31, 2022, and 62.5% of the Company’s new vehicle sales revenue for the year ended December 31, 2021.
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, rental fleet and other working capital needs.
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, cash equivalents,
restricted cash, and accounts receivable. The Company places its cash, cash equivalents and restricted cash with what it considers to be quality financial
institutions based on periodic assessments of such institutions. The Company’s cash, cash equivalents and restricted cash may be uninsured or in deposit
accounts that exceed the Federal Deposit Insurance Corporation insurance limit.
The Company controls credit risk through credit approvals and by selling 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.
59
Table of Contents
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
Total
Accounts receivable as of January 1, 2022 was $140.2 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):
$
$
$
December 31,
2023
2022
119,575 $
98,555
21,395
23,633
(3,805)
259,353 $
83,159
96,978
13,060
29,776
(2,322)
220,651
December 31,
2023
2022
1,388,687 $
47,036
353,992
33,100
(21,368)
955,485
86,306
369,562
34,564
(16,488)
$
1,801,447 $
1,429,429
2023
Reserve for parts inventory
Reserve for commercial vehicle inventory
2022
Reserve for parts inventory
Reserve for commercial vehicle inventory
2021
Reserve for parts inventory
Reserve for commercial vehicle inventory
Inventory
Balance
Beginning
of Year
Net
Charged to
Costs and
Expenses
Net Write-
Offs
Balance
End
of Year
$
$
$
9,423 $
7,065
6,274 $
11,191
(6,532) $
(6,053)
9,165
12,203
7,460 $
919
7,378 $
13,653
(5,415) $
(7,507)
9,315 $
6,075
3,520 $
(536)
(5,375) $
(4,620)
9,423
7,065
7,460
919
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.
60
Table of Contents
The valuation for new and used commercial vehicle inventory is based on specific identification. A detail of new and used commercial vehicle inventory is
reviewed and, if necessary, adjustments to the value of specific vehicles are made on a quarterly basis.
Accounts Receivable and Allowance for Credit Losses
The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. Under Accounting
Standards Topic 326, Financial Instruments – Credit Losses, the Company is required to remeasure expected credit losses for financial instruments held on
the reporting date based on historical experience, current conditions and reasonable forecasts.
Accounts receivable consists primarily of commercial vehicle sales receivables, manufacturers’ receivables and leasing, parts and service sales receivables
and other trade receivables. The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging
and current economic conditions. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that the
likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.
The following table summarizes the changes in the allowance for credit losses (in thousands):
Balance
December 31,
2022
Provision for
the Year
Ended
December 31,
2023
Write offs
Against
Allowance,
net of
Recoveries
Balance
December 31,
2023
$
$
160 $
573
1,589
-
2,322 $
- $
2,576
3,212
1,066
6,854 $
(58) $
(2,185)
(3,141)
13
(5,371) $
102
964
1,660
1,079
3,805
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. The interest rate under the Company’s Floor Plan Credit Agreement is the one month SOFR plus 1.20%. The
effective interest rate applicable to the Company’s Floor Plan Credit Agreement was approximately 6.54% as of December 31, 2023. 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 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 Term SOFR (as defined in the agreement), plus 1.20%.
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, 2023, the Company had approximately $984.4 million outstanding under
its Floor Plan Credit Agreement. The Company’s RTC Canada Floor Plan Agreement expires September 14, 2026. On December 31, 2023, the Company
had approximately $55.9 million CAD outstanding under the RTC Canada Floor Plan Agreement.
61
Table of Contents
The Company’s weighted average interest rate for floor plan notes payable was 3.3% for the year ended December 31, 2023, and 1.6% for the year ended
December 31, 2022, 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
$
1,423,521 $
119,575
1,543,096 $
1,034,727
83,158
1,117,885
Floor plan notes payable related to vehicles
$
1,139,744 $
933,203
December 31,
2023
2022
Lines of Credit
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, 2023; however, $17.9 million was pledged to secure various letters of credit related to self-insurance products, leaving $2.1
million available for future borrowings as of December 31, 2023.
8.
LONG-TERM DEBT:
Long-term debt was comprised of the following variable interest rate term notes (in thousands):
Total long-term debt, net of current maturities
As of December 31, 2023, long-term debt maturities were as follows (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total
December 31,
2023
2022
$
414,002 $
275,433
$
$
-
265,000
149,002
-
-
-
414,002
On September 14, 2021, the Company entered into the WF Credit Agreement with the WF Lenders and the WF Agent. Pursuant to the terms of the WF
Credit Agreement (as amended), the WF Lenders have agreed to make up to $175.0 million of revolving credit loans for certain of the Company’s capital
expenditures, including commercial vehicle purchases for the Company’s Idealease lease and rental fleet, and general working capital needs. Borrowings
under the WF Credit Agreement bear interest per annum, payable on each interest payment date, 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, 2026, although, upon
the occurrence and during the continuance of an event of default, the WF Agent has the right to, or upon the request of the required lenders must, terminate
the commitments and declare all outstanding principal and interest due and payable. The Company may terminate the commitments at any time. The
Company expects to use the revolving credit loans available under the WF Credit Agreement primarily for the purpose of purchasing commercial vehicles
for the Company’s Idealease lease and rental fleet.
62
Table of Contents
On November 1, 2023, 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
December 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 the Company to satisfy various financial ratios such as the leverage
ratio, the asset coverage ratio and the fixed charge coverage ratio. As of December 31, 2023, 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, 2023, and 2022. 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.
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.
63
Table of Contents
● 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 applied the practical expedients permitted under Topic 842, which among other things, allowed it to retain its existing assessment of whether
an arrangement is, or contains, a lease and whether such lease is classified as an operating or finance lease. The Company made an accounting policy
election that keeps leases with an initial term of twelve months or less off 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 certain commercial vehicles and real estate under finance and operating leases. The Company determines whether an arrangement is a
lease at its inception. For leases with terms greater than twelve months, the Company records the related asset and obligation at the present value of lease
payments over the term. Many of the Company’s leases include renewal options and/or termination options that are factored into its determination of lease
payments when appropriate. The Company has elected not to account for lease and nonlease components as a single combined lease component as lessee.
When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a
readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on
information available at lease commencement.
Lease of Vehicles as Lessee
The Company leases commercial vehicles as the lessee under finance leases and operating leases. The lease terms vary from one year to ten years.
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 $50.0 million for the year ended December 31, 2023, and $41.7 million for the
year ended December 31, 2022.
The Company usually guarantees the residual value of vehicles under operating lease and finance lease arrangements. As of December 31, 2023, the
Company guaranteed commercial vehicle residual values of approximately $72.3 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 2023, the Company
recorded approximately $2.1 million in operating lease expense related to these leases.
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
64
$
Year Ended
December 31,
2023
December 31,
2022
14,924 $
5,981
24,655
5,454
191
11,288
6,081
20,135
4,783
413
Table of Contents
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,
2023
December 31,
2022
$
$
$
26,359 $
17,693 $
40,093 $
21,874
14,780
54,385
Weighted-average remaining lease term and discount rate for operating and finance leases as of December 31, 2023 are as follows:
Weighted-average remaining lease term (in months)
Weighted-average discount rate
Finance Leases
Operating Leases
106
4.8%
39
4.3%
Maturities of lease liabilities by fiscal year for finance leases and operating leases as of December 31, 2023 are as follows (in thousands):
2024
2025
2026
2027
2028
2029 and beyond
Total lease payments
Less: Imputed interest
Present value of lease liabilities
Lease of Vehicles as Lessor
Finance
Leases
Operating
Leases
41,189 $
34,172
26,904
18,587
14,961
12,730
148,543 $
(14,807)
133,736 $
23,359
19,282
18,578
17,730
15,502
60,158
154,609
(32,658)
121,951
$
$
$
The Company leases commercial vehicles that the Company owns to customers primarily over periods of one to ten years. The Company applied the
practical expedient permitted within Topic 842 that allows it not to separate lease and nonlease components. Nonlease components typically consist of
maintenance and licensing for the commercial vehicle. The variable nonlease components are generally based on mileage. Some leases contain an option
for the lessee to purchase the commercial vehicle.
The Company’s policy is to depreciate its lease and rental fleet using a straight-line method over each customer’s contractual lease term. The lease unit is
depreciated to a residual value that approximates fair value at the expiration of the lease term. This policy results in the Company realizing reasonable gross
margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.
Sales-type leases are recognized by the Company as lease receivables. The lessee obtains control of the underlying asset and the Company recognizes sales
revenue upon lease commencement. The receivable for sales-type leases as of December 31, 2023, in the amount of $8.4 million is reflected in Other
Assets on the Consolidated Balance Sheet.
65
Table of Contents
Minimum rental revenue to be received for non-cancelable leases and subleases in effect as of December 31, 2023, are as follows (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total
$
$
174,835
140,135
105,495
75,672
44,081
25,405
565,623
Rental income during the year ended December 31, 2023, and 2022, consisted of the following (in thousands):
Minimum rental payments
Nonlease payments
Total
2023
2022
$
$
306,897 $
46,883
353,780 $
278,330
43,927
322,257
11.
SHARE BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS:
Employee Stock Purchase Plan
The Company’s 2004 Employee Stock Purchase Plan, as amended and restated (the “Employee Stock Purchase Plan”), allows eligible employees to
contribute up to $10,625 of their base earnings every six months toward the semi-annual purchase of the Company’s Class A common stock. The
employee’s purchase price is 85% of the lesser of the closing price of the Class A common stock on the first business day or the last business day of the
semi-annual offering period, as reported by The NASDAQ Global Select Market. Employees may purchase shares having a fair market value of up to
$25,000 (measured as of the first day of each semi-annual offering period) for each calendar year. On May 16, 2023, the Company’s shareholders approved
the amendment and restatement of the Employee Stock Purchase Plan to increase the number of shares of Class A Common Stock authorized for issuance
thereunder by 600,000 shares. Under the Employee Stock Purchase Plan, there are approximately 1,082,000 shares remaining of the 4,650,000 shares of the
Company’s Class A common Stock that were reserved for issuance. The Company issued 208,854 shares under the Employee Stock Purchase Plan during
the year ended December 31, 2023 and 201,173 shares during the year ended December 31, 2022. Of the 7,860 employees eligible to participate,
approximately 2,242 elected to participate in the plan as of December 31, 2023.
Non-Employee Director Stock Option Plan
The Rush Enterprises, Inc. 2006 Non-Employee Director Stock Option Plan, as amended and restated (the “Director Plan”), reserved 1,125,000 shares of
Class A common stock for issuance upon exercise of any awards granted under the plan. The Director Plan is designed to attract and retain highly qualified
non-employee directors. Currently, each non-employee director receives a grant of the Company’s Class A common stock equivalent to a compensation
value of $750,000; provided however, that directors may elect to receive up to 40% of the value of such grant in cash. In 2023, three non-employee
directors each received a grant of 4,116 shares of the Company’s Class A common stock, two non-employee directors each received a grant of 2,469 shares
of the Company’s Class A common stock and $58,000 cash and one non-employee director received a grant of 2,880 shares of the Company’s Class A
common stock and $43,500 cash, for total compensation equivalent to $145,000 each. One director who was appointed to the Company’s Board of
Directors in October of 2023 received 1,501 shares of the Company’s Class A common stock, for total compensation equivalent to $72,500. 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. Under the Director Plan, there are approximately
180,298 shares remaining for issuance of the 1,125,000 shares of the Company’s Class A common stock that were reserved for issuance. The Company
granted 21,667 shares of Class A common stock under the Director Plan during the year ended December 31, 2023 and 20,264 shares of Class A common
stock under the Director Plan during the year ended December 31, 2022.
66
Table of Contents
Employee Incentive Plans
In May 2007, the Board of Directors and shareholders adopted the Rush Enterprises, Inc. 2007 Long-Term Incentive Plan (the “2007 Incentive Plan”). The
2007 Incentive Plan provides for the grant of stock options (which may be nonqualified stock options or incentive stock options for tax purposes), stock
appreciation rights issued independent of or in tandem with such options (“SARs”), restricted stock awards and performance awards. The 2007 Incentive
Plan was amended and restated on May 20, 2014, May 16, 2017, May 12, 2020 and May 16, 2023. The number of shares available for issuance under the
plan include 21,600,000 shares of Class A common stock and 9,000,000 shares of Class B common stock.
The aggregate number of shares of common stock subject to stock options or SARs that may be granted to any one participant in any year under the 2007
Incentive Plan is 150,000 shares of Class A common stock or 150,000 shares of Class B common stock. Each option granted pursuant to the 2007 Incentive
Plan has a 150,000-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 three shares of Class A common stock and 9,000,000 shares of Class B common stock reserved for issuance under the Company’s 2007
Incentive Plan. As of December 31, 2023, approximately 3,684,518 shares of Class A common stock and 2,681,701 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, 2023, the Company granted to employees 790,673
options to purchase Class A common stock and 551,138 restricted Class B common stock awards under the 2007 Incentive Plan. During the year ended
December 31, 2022, the Company granted to employees 767,850 options to purchase Class A common stock and 531,900 shares of restricted Class B
common stock awards under the 2007 Incentive Plan. Restricted stock awards are issued when granted but are subject to vesting requirements.
Valuation and Expense Information
Stock-based compensation expense related to stock options, restricted stock awards and employee stock purchases was $30.4 million for the year ended
December 31, 2023, $25.3 million for the year ended December 31, 2022, and $22.2 million for the year ended December 31, 2021. Cash received from
options exercised and shares purchased under all share-based payment arrangements was $18.0 million for the year ended December 31, 2023, $13.3
million for the year ended December 31, 2022, and $18.3 million for the year ended December 31, 2021.
The following table presents a summary of the Company’s stock option activity and related information for the year ended December 31, 2023:
Options
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (in Years)
Aggregate
Intrinsic
Value
Balance of Outstanding Options at January 1, 2023
Granted
Exercised
Forfeited
Balance of Outstanding Options at December 31, 2023
Expected to vest after December 31, 2023
Vested and exercisable at December 31, 2023
5,872,862 $
790,673
(800,988)
(40,249)
5,822,298 $
3,268,970 $
2,520,629 $
20.13
35.04
15.06
31.12
22.76
28.47
15.18
5.8 $ 160,233,514
71,368,515
7.5 $
88,341,805
3.7 $
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, 2023, which was $50.30. The total intrinsic value of options exercised was $19.8 million during the year ended December 31, 2023,
$11.6 million during the year ended December 31, 2022, and $23.4 million during the year ended December 31, 2021.
67
Table of Contents
The following table presents a summary of the status of the number of shares underlying the Company’s non-vested stock options as of December 31,
2023, and changes during the year ended December 31, 2023:
Non-vested Shares
Non-vested at January 1, 2023
Granted
Vested
Forfeited
Non-vested at December 31, 2023
Number of
Shares
Weighted
Average
Grant Date
Fair Value
3,600,568 $
790,673
(1,049,321)
(40,249)
3,301,671 $
7.35
11.82
5.56
9.93
8.95
The total fair value of vested options was $5.8 million during the year ended December 31, 2023, $5.9 million during the year ended December 31, 2022,
and $5.0 million during the year ended December 31, 2021. The weighted-average grant date fair value of options granted was $11.82 per share during the
year ended December 31, 2023, $11.21 per share during the year ended December 31, 2022, and $9.85 per share during the year ended December 31, 2021.
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, 2023. 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, 2023:
Stock Awards and Units
Outstanding non-vested shares at January 1, 2023
Granted
Vested
Forfeited
Outstanding non-vested at December 31, 2023
Expected to vest after December 31, 2023
Weighted
Average
Remaining Aggregate
Intrinsic
Contractual
Value
Life (in Years)
Shares
Weighted
Average
Grant Date
Fair Value
1,128,981
572,804
(627,393)
‒
1,074,392
1,071,636
$
8.6 $
8.6 $
56,921,288
56,775,267
27.92
36.97
24.67
‒
34.64
34.64
The total fair value of the shares issued upon the vesting of restricted and unrestricted stock awards during the year ended December 31, 2023 was $15.5
million. The weighted-average grant date fair value of stock awards granted was $36.97 per share during the year ended December 31, 2023, $36.97 per
share during the year ended December 31, 2022 and $29.91 per share during the year ended December 31, 2021.
As of December 31, 2023, the Company had $11.2 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 $12.2 million of unrecognized compensation cost related to non-vested restricted stock awards
to be recognized over a weighted-average period of 12.2 years.
68
Table of Contents
Defined Contribution Plan
The Company has a defined contribution plan (the “Rush 401k Plan”) that is available to all U.S. based employees. Each employee who has completed 30
days of continuous service is entitled to enter the Rush 401k Plan on the first day of the following month. Participating employees may contribute from 1%
to 1% of their total gross compensation. However, certain highly compensated employees are limited to a maximum contribution of 15% of total gross
compensation. The Company’s policy is for the first 10% of an employee’s contribution, the Company contributes an amount equal to 20% of the
employees’ contributions for those employees with less than five years of service and an amount equal to 40% of the employees’ contributions for those
employees with more than five years of service. The Company incurred expenses related to the Rush 401k Plan of approximately $13.3 million during the
year ended December 31, 2023, $12.1 million during the year ended December 31, 2022, and $8.2 million during the year ended December 31, 2021.
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 $24.8 million on December 31, 2023, and $19.4 million on December 31, 2022. The
related cash surrender value of the life insurance contracts was $18.0 million on December 31, 2023, and $13.0 million on December 31, 2022.
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.
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-
2023
2022
2021
$
347,055 $
391,382 $
241,415
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
$
$
81,089
83,100
2,631
2,627
83,720
4.28 $
4.15 $
85,727
4.71 $
4.57 $
83,838
2,979
86,817
2.88
2.78
Options to purchase shares of common stock that were outstanding for the years ended December 31, 2023, 2022 and 2021 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
1,282
1,271
655
2023
2022
2021
69
Table of Contents
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
2023
Year Ended December 31,
2022
2021
455,288 $
6,773
462,061
87,270 $
16,864
2,265
106,399
7,617
505
(521)
7,601
114,000 $
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
$
$
$
A reconciliation of taxes based on the federal statutory rates and the provisions (benefits) for income taxes are summarized as follows (in thousands):
2023
Amount
Rate
Year Ended December 31,
2022
Amount
Rate
2021
Amount
Rate
$
97,032
Income taxes at the federal statutory rate
State income taxes, net of federal benefit
(a)
Tax effect of permanent differences
Foreign tax rate differential
Other, net
Provision for income taxes
(a) State taxes in Texas, California and Illinois made up the majority (greater than 50 percent) of the tax effect in this category
14,120
1,357
266
1,225
114,000
12,708
(488)
(2134)
197
117,242
3.1
0.3
0.0
0.3
24.7% $
106,959
21.0% $
$
21.0% $
65,694
2.5
(0.1)
(0.4)
0.0
23.0% $
7,874
(2502)
(313)
1,515
72,268
21.0%
2.5
(0.8)
(0.1)
0.5
23.1%
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
Vehicle finance lease obligations
Finance and operating leases - Liability
Stock options
Accrued liabilities
State net operating loss carry forward
State tax credit
Other
Finance and operating leases - Asset
Fixed assets and intangibles
Net deferred income tax liability
70
December 31,
2023
2022
(5,215) $
(436)
(31,178)
(29,446)
(8,785)
(4,653)
(1,111)
(34)
(6,167)
29,031
217,565
159,571 $
(4,710)
(430)
(28,514)
(25,283)
(7,525)
(3,632)
(1,268)
(77)
(5,519)
24,989
203,939
151,970
$
$
Table of Contents
As of December 31, 2023, the Company had approximately $26.9 million in state net operating loss carry forwards that expire from 2023 to 2042, which
result in a deferred tax asset of approximately $1.1 million. The Company has concluded that its state net operating losses are more likely than not to be
realized and has not recorded a valuation allowance against them.
The Company had unrecognized income tax benefits totaling $6.7 million as a component of accrued liabilities as of December 31, 2023, and $5.3 million
as of December 31, 2022, 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, 2023, 2022 and 2021, the Company recognized
approximately $86,200, $86,200, and $129,660 in interest expense. No amounts were accrued for penalties. The Company had approximately $389,000,
$389,000 and $279,000 of interest accrued as of December 31, 2023, 2022 and 2021, respectively.
Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to approximately $22.9 million at December 2023 and $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, 2023, the tax
years ended December 31, 2020 through 2023 remained subject to audit by federal tax authorities and the tax years ended December 31, 2019 through
2023, 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
2023
2022
2021
$
$
5,377 $
2,582
(1,188)
6,771 $
4,309 $
2,025
(957)
5,377 $
3,306
1,512
(509)
4,309
14.
COMMITMENTS AND CONTINGENCIES:
From time to time, the Company is involved in litigation arising out of its operations in the ordinary course of business. The Company maintains liability
insurance, through self-insurance and third-party excess insurance, including product liability coverage, in amounts deemed adequate by management.
However, an uninsured or partially insured claim, or claim for which indemnification is not available, could have a material adverse effect on the
Company’s financial condition or results of operations. As of December 31, 2023, 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 December 4, 2023, the Company acquired certain assets of Freeway Ford Truck Sales, Inc., which included real estate and a Ford commercial vehicle
franchise in Chicago, Illinois, along with commercial vehicle and parts inventory. The transaction was valued at approximately $16.3 million, with the
purchase price paid in cash.
On November 7, 2022, the Company acquired certain assets of Scheppers International Truck Center, Inc., which included real estate and an International
truck franchise in Jefferson City, Missouri, along with commercial vehicle and parts inventory. The transaction was valued at approximately $6.8 million,
with the purchase price paid in cash.
71
Table of Contents
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 $50 million, resulting in a gain of $7.0 million included in the line item Other income (expense) on the
Consolidated Statements of Income in the year ended December 31, 2022. The Company also recognized a reversal of deferred tax liabilities of $7.0
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 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
80,196
(30,501)
(19,978)
(1,980)
(7,875)
(69,545)
44,174
3,906
3,422
(37,309)
(17,828)
(6,958)
19,361
The goodwill of $44.2 million for the RTC Canada acquisition is primarily attributable to the synergies expected to arise after obtaining a controlling
interest in the entity.
Prior to May 2, 2022, the Company accounted for its 50% equity interest in RTC Canada as an equity-method investment. Subsequent to the Company’s
acquisition of the additional 50% equity interest on May 2, 2022, operations of RTC Canada are included in the accompanying consolidated financial
statements.
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 sales, 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.
72
Table of Contents
There were no material intersegment sales during the years ended December 31, 2023, 2022 or 2021.
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, 2023, 2022 and 2021 (in thousands):
Truck
Segment
All
Other
Totals
$
$
$
2023
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
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
7,909,230 $
777
53,694
59,373
512,375
462,055
4,308,264
418,148
367,942
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
15,794 $
–
–
457
6
6
55,977
2,560
939
16,821 $
–
–
311
698
698
52,059
2,560
557
17,072 $
–
308
258
1,642
1,333
51,612
2,560
3,553
7,925,024
777
53,694
59,830
512,381
462,061
4,364,241
420,708
368,881
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
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.
73
Table of Contents
The following table summarizes the Company’s disaggregated revenue by revenue source, excluding lease and rental revenue, for the years ended
December 31, 2023, December 31, 2022 and December 31, 2021 (in thousands):
Commercial vehicle sales revenue
Parts revenue
Commercial vehicle repair service revenue
Finance revenue
Insurance revenue
Other revenue
Total
$
$
2023
2022
2021
4,957,969 $
1,493,903
1,068,238
11,665
12,606
26,863
7,571,244 $
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
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, 2023, or December 31, 2022. 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.
74
Table of Contents
The Company receives commissions from third-party insurance companies for arranging insurance coverage for customers. The receipt of such
commissions is deemed to be a single performance obligation that is satisfied when the insurance coverage is bound. The Company has no further
obligations under the contract. The Company is the agent in this transaction because it does not have control over the insurance coverage provided by the
insurance carrier. Consideration paid to the Company by the insurance provider is based on the agreement between the Company and the insurance
provider.
The Company records revenues from finance and insurance products at the net commission amount, which includes estimates of chargebacks that can occur
if the underlying contract is not fulfilled. Chargeback amounts for commissions from financing companies are estimated assuming financing contracts are
terminated before the customer has made six monthly payments. Chargeback amounts for commissions from insurance companies are estimated assuming
insurance contracts are terminated before the underlying insurance contractual term has expired. Chargeback reserve amounts are based on historical
chargebacks and have historically been immaterial. The Company does not have any right to retrospective commissions based on future profitability of
finance and insurance contracts arranged.
Other revenue consists mostly of documentation fees that are charged to customers in connection with the sale of a commercial vehicle and recognized as
other revenue when a truck is sold. The Company recognizes the documentation fees at the point in time when the commercial vehicle is delivered to the
customer.
18.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
The following table shows the components of accumulated other comprehensive income (loss) (in thousands):
Balance as of December 31, 2021
Reclassification of currency translation related to equity
Foreign currency translation adjustment
Balance as of December 31, 2022
Foreign currency translation adjustment
Balance as of December 31, 2023
$
$
787
(601)
(4,316)
(4,130)
1,967
(2,163)
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.
75
Table of Contents
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, 2023, 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, 2023, 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, 2023, 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). Based on the assessment, management determined that the Company maintained
effective internal control over financial reporting as of December 31, 2023, based on those criteria.
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, 2023. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2023, is included in this Item 9A.
76
Table of Contents
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, 2023, 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, 2023, 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, 2023 and 2022, 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, 2023, and the related notes and our report dated February 23, 2024
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, 2024
77
Table of Contents
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 2024 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 2024 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 2024 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 2024 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 2024 Annual Meeting of Shareholders.
78
Table of Contents
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, 2023, and 2022;
Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021;
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022, and 2021;
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023, 2022, and 2021;
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021; 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
3.4
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)
Certificate of Amendment to the Restated Articles of Incorporation of Rush Enterprises, Inc. (incorporated herein by reference to Exhibit
3.2 of the Company’s Quarterly Report on Form 10-Q (File No. 000-20797) for the quarter ended June 30, 2023)
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 4.5 of the Company’s Form S-8 filed November 30, 2023
79
Table of Contents
10.1+
10.2+
10.3+
10.4+
Rush Enterprises, Inc. Amended and Restated 2004 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.2 of
the Company’s Current Report on Form 8-K (File No. 000-20797) filed May 22, 2023)
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)
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 22, 2023)
10.5+*
Form of Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan Stock Option Award Agreement
10.6+*
Form of Rush Enterprises, Inc. Amended and Restated 2007 Long-Term Incentive Plan Restricted Stock Award Agreement
10.7+
10.8+
10.9+
10.10+
10.11
10.12
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 July 6, 2023. 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 10.3 of the Company's Quarterly Report on Form 10-Q (File No. 000-20797) for the quarter
ended September 30, 2023)
80
Table of Contents
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
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)
First Amendment to Fifth Amended and Restated Credit Agreement, dated as of May 31, 2023, by and among the Company and certain
of its subsidiaries, the Lenders signatory thereto and BMO Harris Bank N.A., as administrative agent and collateral agent for the Lenders
(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,
2023)
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)
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)
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)
Second Amendment to Credit Agreement, dated as of December 22, 2023 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 22, 2023)
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)
Second Amended and Restated Inventory Financing and Purchase Money Security Agreement, dated as of November 1, 2023 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 November 6, 2023)
$300.0 million Promissory Note dated November 1, 2023 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report
on Form 8-K (File No. 000-20797) filed November 6, 2023)
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)
81
Table of Contents
10.25
10.26
10.27
21.1*
23.1*
31.1*
31.2*
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)
First Amendment to First Amended and Restated BMO Wholesale Financing and Security Agreement, dated as of May 31, 2023, by and
among RTC-Canada and BMO (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File
No. 000-20797) filed June 6, 2023)
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)
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
32.1++
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2++
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1*
Rush Enterprises, Inc. Clawback Policy
101.INS
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.
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.
82
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, 2024
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
/s/ STEVEN L. KELLER
Steven L. Keller
/s/ MICHAEL MCROBERTS
Michael McRoberts
/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
/s/ AMY BOERGER
Amy Boerger
President, Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
February 23, 2024
February 23, 2024
Chief Operating Officer and Director
February 23, 2024
Director
Director
Director
Director
Director
Director
Director
83
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
Exhibit 10.5
RUSH ENTERPRISES, INC. AMENDED AND RESTATED 2007 LONG-TERM INCENTIVE PLAN
FORM OF STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (“Agreement”) dated as of the Grant Date (the “Grant Date”) set forth on Schedule I hereto, between RUSH
ENTERPRISES, INC., a Texas corporation (the “Company”), and the employee of the Company or of a Subsidiary identified on Schedule I hereto (the
“Employee”).
On the Grant Date the Company granted to the Employee the option or options hereinafter described pursuant to, and subject to and upon the
terms and conditions set forth in, the Rush Enterprises, Inc. 2007 Amended and Restated Long-Term Incentive Plan (as amended, restated, supplemented or
modified from time to time, the “Plan”), and promptly thereafter notified the Employee of the grant of such option or options. Capitalized terms used but
not defined in this Agreement have the meanings ascribed to such terms in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties
hereto hereby agree as follows:
1. Grant of Option.
(a) On the Grant Date, the Company granted to the Employee, as a matter of separate agreement and not in lieu of salary or any other
compensation for services, the right and option to purchase all or any whole number of the aggregate number of Shares set forth on Schedule I hereto
(herein, the “Option Shares”), on the terms and conditions herein set forth.
(b) To the extent set forth in Schedule I hereto, the right and option to purchase the Option Shares are intended to be an ISO. To the
extent such right and option to purchase the Option Shares is not identified on Schedule I hereto as being intended to be an ISO, such right and option will
be considered a non-statutory option. In addition, to the extent that a right and option to purchase the Option Shares intended to be an ISO does not qualify
as an ISO, such right and option, to the extent that it does not so qualify, shall be converted to a non-statutory option.
(c) The ISOs and non-statutory stock options granted to the Employee hereunder are each referred to as an “Option” and collectively
referred to as the “Options”.
2. Terms.
(a) Exercise Price. The exercise price per Option Share subject to an Option granted hereunder shall be the per share amount set forth
in Schedule I hereto for such Option (the “Exercise Price”). With respect to any Option, the Exercise Price shall not be less than the Fair Market Value per
Share as of the Grant Date.
(b) Vesting. Subject to the provisions of Section 4 of this Agreement and the Plan, the Option or Options granted hereunder shall
become vested and exercisable as to the portions of the aggregate number of Option Shares covered by such Option as set forth on Schedule I hereto on and
after each of the related dates during the term of such Option set forth on Schedule I hereto.
(c) Term and Conditions of Exercise. An Option granted hereunder shall be exercisable in whole at any time or in part from time to
time during the term of such Option as to all or any of the Option Shares then purchasable under such Option, but not as to less than the minimum number
of Option Shares stated on Schedule I hereto with respect to such Option (or the Option Shares then purchasable under the Option if less than such
minimum) at any one time; provided that if there is a SAR (as defined in the Plan) outstanding which relates to any of the shares purchasable under such
Option, then the number of shares so purchasable shall be reduced by the number of Option Shares in respect of which the SAR has been exercised.
- 1 -
The term of the Option or Options subject hereto shall be for the number of years from the Grant Date set forth on Schedule I hereto with respect
to such Option or such shorter period of time as is described in Section 4. In no event shall the term of the Option exceed ten years from the Grant Date.
Except as provided in Section 4, an Option granted hereunder shall not be exercisable unless the Employee shall, at the time of exercise, be an
employee of the Company or of a Subsidiary. The holder of such Option shall have none of the rights of a shareholder with respect to the Option Shares
subject to such Option until such Option Shares are transferred to the holder upon the exercise of such Option.
3. Restrictions on Transfer. An Option granted hereunder shall not be assignable or transferrable by the Employee except by will or by the
laws of descent and distribution, and subject to Section 4(a), such Option is exercisable, during the Employee’s lifetime, only by the Employee. The
designation of a beneficiary by the Employee shall not constitute a transfer. More particularly (but without limiting the generality of the foregoing), such
Option may not be assigned, transferred (except as aforesaid), pledged or encumbered in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. In the event of any attempted assignment, transfer, pledge, encumbrance or other disposition of such
Option contrary to the provisions hereof, or the levy of any attachment or similar process upon such Option, such Option shall be null and void and of no
further effect.
4. Status of Option Upon Certain Events. If the Employee’s employment shall terminate prior to the complete exercise of an Option granted
hereunder, then such Option shall thereafter be exercisable solely to the extent provided in paragraphs (a) through (c) of this Section 4; provided, however,
that (i) such Option may not be exercised after the scheduled expiration date and (ii) if the Employee’s employment terminates for any reason other than as
contemplated by paragraphs (a) through (c) of this Section 4, the Option shall remain exercisable for a period of 30 days following such termination (but in
no event shall such period extend beyond the scheduled expiration of such Option) at which time such Option shall immediately terminate and be forfeited,
but only for the number of Option Shares for which such Option shall have vested as provided on Schedule I hereto as of the date of such termination.
(a) Death or Disability or Retirement. If Employee’s employment terminates due to his or her death, Disability or Retirement (defined
as termination by the Employee of the Employee’s employment relationship with the Company after 10 years of employment with the Company and
attaining the age of 60), an Option granted hereunder (unless previously terminated) may be exercised as follows: (i) in the case of Employee’s death, in
full for the aggregate number of Option Shares covered thereby by the legatee or legatees of such Option under the Employee’s last will, or by the personal
representatives or distributees of the Employee, at any time within a period of one year after the Employee’s death, but in no event after the expiration of
such Option set forth in Section 2(c); (ii) in the case of Disability, in full for the aggregate number of Option Shares covered thereby by the Employee or by
the personal representatives of the Employee if the Employee is unable to act for himself or herself, at any time within a period of one year after the
Employee’s termination date, but in no event after the expiration of such Option set forth in Section 2(c) herein; and (iii) in the case of Retirement, for so
long as the Employee does not become employed by a “competitor” of the Company subsequent to such retirement, the Option shall continue to vest and
become exercisable pursuant to the Vesting Schedule set forth on Schedule I hereto, but in no event shall the Option be exercisable after the expiration of
the Option set forth in Section 2(c) herein. A determination as to whether the Employee has become employed by a “competitor,” and the definition of
“competitor,” shall be made by the Committee in its sole discretion. In the event Employee becomes employed by a “competitor,” then the Option can be
exercised within 90 days of the date such employment occurs for the number of Option Shares for which such Option shall have vested on such date, but in
no event shall the Option be exercisable after the expiration of the Option set forth in Section 2(c) herein. If an ISO is exercised more than three months
after the Employee’s Retirement and the Employee has not died or incurred a Disability, such Option will be converted to a non-statutory option.
- 2 -
(b) Termination with Cause. If the Employee’s employment with the Company or a Subsidiary shall be terminated by the Company or
such Subsidiary for Cause (as defined in the Plan) prior to the exercise of any part of the Option or Options granted hereunder, then such Option or Options
held by the Employee shall immediately terminate and be forfeited unless the Committee, in its sole discretion, shall otherwise determine.
(c) Change in Employment. The Option or Options granted hereunder shall not be affected by any change of employment (or by any
temporary leave of absence approved by the Committee or by the Board itself), so long as the Employee continues to be in the employ of the Company or
of a Subsidiary.
5. Adjustments. The Employee acknowledges that the Option is subject to modification and termination in certain events as provided in this
Agreement and Sections 4.3 and 15 of the Plan. Upon the occurrence of an event described in Section 4.3 or Section 15 of the Plan, any and all new,
substituted or additional securities or other property to which a holder of a Share issuable in settlement of the Option would be entitled shall be
immediately subject to the Agreement and included within the meaning of the term “Shares” for all purposes of the Option. The Employee shall be notified
of such adjustments and such adjustments shall be binding upon the Company and the Employee.
6. Payment; Method of Exercise. Payment of the purchase price of the Option Shares subject to an Option granted hereunder may be made
(i) in any combination of cash or whole Shares already owned by the Employee or (ii) in Shares withheld by the Company from the Option Shares
otherwise issuable to the Employee as a result of the exercise of such Option (“cashless exercise”). Subject to the terms and conditions of this Agreement,
such Option may be exercised by execution and delivery of a written notice of exercise (the “Notice of Exercise”) in the form authorized by the Company,
which may be electronic or written. Such notice shall (a) state the election to exercise such Option, the number of Option Shares in respect of which it is
being exercised and the manner of payment for such Option Shares and (b) be signed (or digitally signed or authenticated) by the person or persons so
exercising such Option and, in the event such Option is being exercised pursuant to Section 4 by any person or persons other than the Employee,
accompanied by appropriate proof of the right of such person or persons to exercise such Option. If the Option being exercised is an ISO and non-statutory
options have also been granted to the Employee hereunder, such notice shall also identify whether the Option being exercised is an ISO and, if so, the
number of Option Shares to be purchased pursuant to such exercise. Such notice shall either (i) elect cashless exercise or be accompanied by payment of
the full purchase price of such Option Shares, in which event the Company shall issue to or on behalf of the Employee (or any other person or persons
exercising the Option) the purchased Shares, or (ii) fix a date (not more than 10 business days from the date of such notice) for the payment of the full
purchase price of such Option Shares at the Company’s principal office, against delivery of the purchased Shares. Cash payments of the purchase price
shall, in case of clause (i) or (ii) above, be made by cash or check payable to the order of the Company. Share payments (valued at Fair Market Value on
the date of exercise, as determined by the Committee), shall be made by delivery of stock certificates in negotiable form. All cash and Share payments
shall, in either case, be delivered to the Company at its principal office, attention of the Secretary. Shares withheld pursuant to a cashless exercise election
shall be valued at Fair Market Value on the date of exercise, as determined by the Committee. If certificates representing Shares are used to pay all or part
of the purchase price of an Option granted hereunder, a replacement certificate shall be delivered by the Company representing the number of Shares
delivered but not so used, and an additional certificate shall be delivered representing the additional Shares to which the holder of such Option is entitled as
a result of the exercise of such Option. As soon as practical after the exercise date, the Company shall issue to or on behalf of the Employee (or any other
person or persons exercising the Option) the purchased Shares (in certificated form or as evidenced by an appropriate entry on the books of the Company or
a duly authorized transfer agent of the Company), subject to the appropriate legends and/or stop transfer instructions. All Shares issued as provided herein
will be fully paid and nonassessable.
- 3 -
7. Administration. The Committee shall have the power to interpret the Plan and this Agreement, and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee shall be final and binding upon the Employee, the Company and all other interested persons.
8. Tax Withholding and Advice.
(a) In General. The Employee acknowledges that, regardless of any action taken by the Company, the ultimate liability for all income
tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Employee’s participation in the Plan and
legally applicable to the Employee or deemed by the Company in its discretion to be an appropriate charge to the Employee even if legally applicable to the
Company (“Tax-Related Items”), is and remains the Employee’s responsibility and may exceed the amount actually withheld by the Company. The
Employee further acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in
connection with any aspect of an Option, including, but not limited to, the grant, vesting or exercise of an Option, the subsequent sale of Shares acquired
pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any
aspect of an Option to reduce or eliminate the Employee’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Employee is
subject to Tax-Related Items in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as
applicable, the Employee acknowledges that the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b) Withholding of Taxes. Prior to the relevant taxable or tax withholding event, as applicable, the Employee agrees to make adequate
arrangements satisfactory to the Company to satisfy all Tax-Related Items. In this regard, the Employee authorizes the Company, or its agents, at their
discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:
(i) withholding from the Employee’s wages or other cash compensation paid to the Employee by the Company;
Market Value equal to the Tax-Related Items obligations, as determined by the Company as of the date on which the Tax-Related Items obligations arise;
(ii) withholding a number of whole Shares otherwise deliverable to the Employee upon exercise of the Option having a Fair
or through a mandatory sale arranged by the Company (on the Employee’s behalf pursuant to this authorization) without further consent; or
(iii) withholding from the proceeds of the sale of Shares acquired upon exercise of the Option, either through a voluntary sale
(iv) direct payment from the Employee.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory
withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case the Employee will receive a refund of any
over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in
Shares, for tax purposes, the Employee is deemed to have been issued the full number of Shares subject to the exercised Option, notwithstanding that a
number of the Shares are held back solely for the purpose of paying the Tax-Related Items.
- 4 -
(c) Tax Advice. The Employee represents, warrants and acknowledges that the Company has made no warranties or representations to
the Employee with respect to the income tax, social contributions or other tax consequences of the transactions contemplated by this Award Agreement,
and the Employee is in no manner relying on the Company or the Company’s representatives for an assessment of such tax consequences. THE
EMPLOYEE UNDERSTANDS THAT THE TAX AND SOCIAL SECURITY LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
EMPLOYEE IS HEREBY ADVISED TO CONSULT WITH HIS OR HER OWN PERSONAL TAX, LEGAL AND FINANCIAL ADVISORS
REGARDING THE PARTICIPANT’S PARTICIPATION IN THE PLAN BEFORE TAKING ANY ACTION RELATED TO THE PLAN. NOTHING
STATED HEREIN IS INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING TAXPAYER
PENALTIES.
9. Reserves, Etc. Shares delivered upon the exercise of an Option granted hereunder shall, in the discretion of the Board or the Committee, be
either Shares heretofore or hereafter authorized and then unissued, or previously issued Shares heretofore or hereafter acquired through purchase in the
open market or otherwise, or some of each. The Company shall be under no obligation to reserve or to retain in its treasury any particular number of
Shares at any time, and no particular Shares, whether unissued or held as treasury Shares, shall be identified as those covered by an Option granted
hereunder.
10. No Right to Continued Employment. Nothing in this Agreement or in the Plan shall confer upon the Employee any right to continue in the
employ of the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge the
Employee at any time for any reason whatsoever, with or without cause and with or without notice.
11. Restrictions on Exercise of the Option and Issuance of Shares. The exercise of the Option and issuance of Shares upon such exercise
shall be subject to compliance with all applicable requirements of U.S. federal, state or foreign law with respect to such securities. No Shares may be issued
hereunder if the issuance of such Shares would constitute a violation of any applicable U.S. federal, state or foreign securities laws or other laws or
regulations or the requirements of any stock exchange or market system upon which the Shares may then be listed. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any
Shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority
shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Employee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company. Further, regardless of whether the transfer or issuance of the Shares to be issued pursuant to the Option has been
registered under the Securities Act or has been registered or qualified under the securities laws of any State, the Company may impose additional
restrictions upon the sale, pledge, or other transfer of the Shares (including the placement of appropriate legends on stock certificates and the issuance of
stop-transfer instructions to the Company’s transfer agent) if, in the judgment of the Company and the Company’s counsel, such restrictions are necessary
in order to achieve compliance with the provisions of the Securities Act, the securities laws of any State, or any other law.
12. Entire Agreement; Amendment. This Agreement together with the Plan constitutes the entire agreement between the parties with respect
to the subject matter hereof. Any term or provision of this Agreement may be waived at any time by the party which is entitled to the benefits thereof,
except that any waiver of any term or condition of this Agreement must be in writing.
- 5 -
The Committee shall have the authority to amend this Agreement to include any provision which, at the time of such amendment, is authorized
under the terms of the Plan; however, an Option granted hereunder may not be revoked or altered in a manner unfavorable to the holder without the written
consent of the holder.
13. Governing Law. The laws of the State of Texas shall govern the interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflict of laws. For purposes of litigating any dispute that arises under this grant or this
Award the parties hereby submit to and consent to the jurisdiction of the State of Texas.
14. Mandatory Mediation and Arbitration Procedure. By execution of this Agreement and acceptance of this Award, which is a voluntary
benefit provided to the Employee by the Company, the Employee waives the Employee’s right to a jury trial in state or federal court and agrees that
disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party. If a dispute remains unresolved at the
conclusion of the mediation process, either party may submit the dispute for resolution by final binding arbitration. The arbitrator shall have the authority to
allow for appropriate discovery and exchange of information prior to a hearing, including (but not limited to) production of documents, information
requests, depositions, and subpoenas. By execution of this Agreement, however, the Employee does not waive the Employee’s right to any normally
available remedies the Employee may have in connection with any claim the Employee may bring against the Company, as an arbitrator can award any
normal remedies the Employee could get in a court proceeding. By execution of this Agreement, the Employee represents that, to the extent the Employee
considered necessary, the Employee has sought, at the Employee’s own expense, counsel regarding the terms of this Agreement and the waiver
contemplated in this Section 14. If this arbitration provision is found inapplicable, then either party may file suit and each party agrees that any suit, action,
or proceeding arising out of or relating to this Agreement shall be brought in the United States District Court for the Western District of Texas (or should
such court lack jurisdiction to hear such action, suit or proceeding, in a Texas State court in Bexar County, Texas) and that the parties shall submit to the
jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection a party may have to the laying of venue for
any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO
A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.
15. Further Instruments and Imposition of Other Requirements. The parties agree to execute such further instruments and to take such
further action as may be reasonably necessary to carry out the purposes and intent of this Agreement. The Company reserves the right to impose other
requirements on the Employee’s participation in the Plan, on the Option and on any Shares acquired under the Plan, to the extent the Company determines
it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan.
16. Successors. This Agreement shall be binding upon and inure to the benefit of the successors, assigns and heirs of the respective parties.
17. Acceleration of Retirement Eligibility. Notwithstanding the terms of Section 4(a), the Committee in its sole discretion may at any time
accelerate the date an Employee is eligible to Retire.
- 6 -
18. Notices. All notices or other communications made or given in connection with this Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by registered or certified mail, return receipt requested, to those listed below at their following respective
addresses or at such other address as each may specify by notice to the others:
To the Employee:
As set forth in Schedule I
To the Company:
Rush Enterprises, Inc.
555 IH-35 South, Suite 500
New Braunfels, TX 78130
Attn: Compensation Committee
19. Authorization to Release Necessary Personal Information.
The Employee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Employee’s
personal data as described in this Agreement and any other Option grant materials (“Data”) by and among, as applicable, the Company and its
Subsidiaries for the exclusive purpose of implementing, administering and managing the Employee’s participation in the Plan.
The Employee understands that the Company may hold certain personal information about the Employee, including, but not limited to, the
Employee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job
title, any Shares or directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested,
unvested or outstanding in the Employee’s favor, for the exclusive purpose of implementing, administering and managing the Plan.
20. Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a
waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
21. Compliance.
(a) Conformity to Securities Laws. The Employee acknowledges that the Plan and this Agreement are intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, and State securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the
Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law,
the Plan and this Award Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
- 7 -
(b) Section 409A. Notwithstanding any other provision of the Plan, this Agreement, and the Plan shall be interpreted in accordance
with, and incorporate the terms and conditions required by, Section 409A of the Code (with any Department of Treasury regulations and other interpretive
guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof (“Section 409A”)).
The Company reserves the right, to the extent the Company deems necessary or advisable in its sole discretion, to unilaterally amend or modify the Plan or
this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions,
including amendments or actions that would result in a reduction in benefits payable under the Option, as the Committee determines are necessary or
appropriate to ensure that this Option qualifies for exemption from, or complies with the requirements of, Section 409A or mitigate any additional tax,
interest and/or penalties or other adverse tax consequences that may apply under Section 409A; provided, however, that the Company makes no
representation that the Option will be exempt from, or will comply with, Section 409A, and makes no undertakings to preclude Section 409A from
applying to the Option or to ensure that it complies with Section 409A.
(c) Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Employee
is subject to Section 16 of the Exchange Act, the Plan and this Agreement shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform
to such applicable exemptive rule.
22. Construction. Titles are provided herein for convenience only and are not to serve as a basis for interpretation on construction of the
Agreement. The singular form shall include the plural, when the context so indicates. In the event of an inconsistency between the terms of this
Agreement and the terms of Schedule I hereto, the terms of Schedule I shall prevail. In the event of an inconsistency between the terms of this Agreement
(including Schedule I) and the terms of the Plan, the terms of the Plan shall prevail.
23. Clawback. By your signature below, you hereby acknowledge and agree that (a) the Options and the Shares issuable upon the exercise of the
Option shall be subject to the clawback provisions contained in Section 14.3 of the Plan, and (b) you have received a copy of, read, understand and accept
the terms of the Company’s Clawback Policy (as amended and restated October 23, 2023), as such policy is attached hereto as Exhibit A.
24. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in
the Plan by electronic means. The Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through
an online or electronic system established and maintained by the Company or a third party designated by the Company.
{Signature Page Follows.}
- 8 -
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto duly authorized, and the
Employee has hereunto set his or her signature, all as of the Grant Date.
RUSH ENTERPRISES, INC.
By:
EMPLOYEE
By:
Print Name:
W.M. “Rusty” Rush
Print Name:
.
Title:
Chief Executive Officer and President
- 9 -
EXHIBIT A
Rush Enterprises, Inc. Clawback Policy
As Amended and Restated October 23, 2023
I. Adoption. This Rush Enterprises, Inc. Clawback Policy (the “Policy”) is hereby adopted by the Board of Directors (the “Board”) of Rush Enterprises,
Inc. (the “Company”) on October 23, 2023. This Policy amends and restates the Company’s Clawback Policy dated February 15, 2021 (the “Prior
Policy”).
II. Administration. The Policy will be administered by the non-management members of the Board or a committee thereof, or, if so delegated by the
non-management members of the Board, by the Compensation Committee of the Board (as applicable, the “Administrator”). The Administrator shall have
full and final authority to make all determinations under the Policy, including without limitation whether the Policy applies and if so, the amount of
compensation to be repaid or forfeited by a Covered Individual. All determinations and decisions made by the Administrator pursuant to the provisions of
this Policy shall be final, conclusive and binding on all persons, including the Company, its subsidiaries, its stockholders and employees.
III. Definitions. As used in this Policy, the following definitions shall apply:
A.“ Accounting Restatement” means an accounting restatement of the Company’s financial statements due to the Company’s material
noncompliance with any financial reporting requirement under the federal securities laws, including any required accounting restatement to correct an error
in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the
error were corrected in the current period or left uncorrected in the current period.
For purposes of the policy, an Accounting Restatement shall not be deemed to occur in the event of a revision of the Company’s financial
statements due to an out-of-period adjustment (i.e., when the error is immaterial to the previously issued financial statements and the correction of the error
is also immaterial to the current period) or a retrospective (i) application of a change in accounting principles, (ii) revision to reportable segment
information due to a change in the structure of the Company’s internal organization, (iii) reclassification due to a discontinued operation, (iv) application of
a change in reporting entity, such as from a reorganization of entities under common control, or (v) revision for stock splits, reverse stock splits, stock
dividends, or other changes in capital structure.
B.“ Administrator” has the meaning set forth in Section II hereof.
C.“ Applicable Period” means the three (3) completed fiscal years immediately preceding the date on which the Company is required to prepare
an Accounting Restatement, as well as any transition period (that results from a change in the Company’s fiscal year) within or immediately following
those three completed fiscal years (except that a transition period that comprises a period of at least nine (9) months shall count as a completed fiscal year).
The “date on which the Company is required to prepare an Accounting Restatement” is the earlier to occur of (i) the date the Board concludes, or
reasonably should have concluded, that the Company is required to prepare an Accounting Restatement or (ii) the date a court, regulator or other legally
authorized body directs the Company to prepare an Accounting Restatement, in each case, regardless of if or when the restated financial statements are
filed.
D.“ Board” has the meaning set forth in Section I hereof.
A-1
E.“ Code” means the Internal Revenue Code of 1986, as amended.
F.“ Company” has the meaning set forth in Section I hereof.
G.“ Covered Compensation” means any Incentive-Based Compensation granted, vested, or paid to a Covered Individual at any time during the
performance period for the Incentive-Based Compensation and that was received (i) on or after the Effective Date, (ii) after the person became a Covered
Individual, and (iii) at a time that the Company had a class of securities listed on a U.S. national securities exchange. For purposes of the policy, Incentive-
Based Compensation is deemed “received” in the Company’s fiscal period during which the Financial Reporting Measure specified in or otherwise relating
to the Incentive-Based Compensation award is attained, even if the grant, vesting, or payment of the Incentive-Based Compensation occurs after the end of
that period.
H.“ Covered Individual” means any Executive Officer and any Other Covered Employee.
I.“ Erroneously Awarded Compensation” means the amount of Covered Compensation granted, vested, or paid to a person during the fiscal
period when the applicable Financial Reporting Measure relating to such Covered Compensation was attained that exceeds the amount of Covered
Compensation that otherwise would have been granted, vested, or paid to the person had such amount been determined based on the applicable Accounting
Restatement, computed without regard to any taxes paid (i.e., on a pre-tax basis). For Covered Compensation based on stock price or total stockholder
return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in an
Accounting Restatement, the Administrator will determine the amount of such Covered Compensation that constitutes Erroneously Awarded
Compensation, if any, based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total stockholder return upon which
the Covered Compensation was granted, vested, or paid and the Administrator shall maintain documentation of such determination and provide such
documentation to Nasdaq.
J.“ Exchange Act” has the meaning set forth in Section V.F.
K.“ Executive Officer” means those persons who are designated by the Board as an “officer” of the Company as such term is defined in Rule
16a-1(f) under the Exchange Act. Both current and former Executive Officers are subject to the Policy in accordance with its terms.
L.“ Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures. Stock price and total shareholder
return are also financial reporting measures. A financial reporting measure need not be presented within the financial statements or included in a filing with
the Securities and Exchange Commission.
M.“ Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of
a Financial Reporting Measure. For purposes of this Policy, “Incentive-Based Compensation” shall also be deemed to include any amounts which were
determined based on (or were otherwise calculated by reference to) Incentive-Based Compensation (including, without limitation, any amounts under any
long-term disability, life insurance, or supplemental retirement or severance plan or agreement or any notional account that is based on Incentive-Based
Compensation, as well as any earnings accrued thereon).
A-2
N.“ Nasdaq” has the meaning set forth in Section V.F.
O.“ Other Covered Employee” means any employee of the Company or any subsidiary of the Company who (i) is not an Executive Officer and
(ii) is or becomes a participant in the Company’s equity incentive plan (currently the Rush Enterprises, Inc. Amended and Restated 2007 Long-Term
Incentive Plan) on or after the Effective Date. A person who is or becomes an Other Covered Employee will cease to be an Other Covered Employee on the
earlier of (x) the date that is three (3) years after the date such person ceases to be a participant in the Company’s equity incentive plan or (y) the date that is
three years following the date that such person ceases to be an employee of the Company or any subsidiary of the Company.
IV. Coverage. The Policy will apply to all Covered Individuals.
V. Recoupment Upon Restatement of Financial Statements.
A. In the event of an Accounting Restatement, any Erroneously Awarded Compensation received by an Executive Officer during the Applicable
Period prior to the Accounting Restatement (i) that is then-outstanding but has not yet been paid shall be automatically and immediately forfeited and (ii)
that has been paid to an Executive Officer shall be subject to reasonably prompt repayment to the Company. The Administrator must pursue (and shall not
have the discretion to waive) the forfeiture and/or repayment of such Erroneously Awarded Compensation received by an Executive Officer, except as
provided in Section V.D. below.
B. If, in the event of an Accounting Restatement, the Administrator determines that an Other Covered Employee’s fraud or intentional
misconduct directly related to such Accounting Restatement, then, unless otherwise determined by the Administrator in its discretion, any Erroneously
Awarded Compensation received by such Other Covered Employee during the Applicable Period prior to the Accounting Restatement (i) that is then-
outstanding but has not yet been paid shall be automatically and immediately forfeited and (ii) that has been paid to the Other Covered Employee shall be
subject to reasonably prompt repayment to the Company.
C. In the event that the Administrator determines that any person shall repay any Erroneously Awarded Compensation pursuant to this Section V,
the Administrator shall provide written notice to such person by email or certified mail to the physical address on file with the Company for such person,
and the person shall satisfy such repayment in a manner and on such terms as required by the Administrator, and the Company shall be entitled to set off
the repayment amount against any amount owed to the person by the Company, to require the forfeiture of any award granted by the Company to the
person, or to take any and all necessary actions to reasonably promptly recoup the repayment amount from the person, in each case, to the fullest extent
permitted under applicable law, including, without limitation, Section 409A of the Code. If the Administrator does not specify a repayment timing in the
written notice described above, the applicable person shall be required to repay the Erroneously Awarded Compensation to the Company by wire, cash, or
cashier’s check no later than thirty (30) days after receipt of such notice.
D. Notwithstanding the foregoing, the Administrator may determine not to pursue the forfeiture and/or recovery of Erroneously Awarded
Compensation from any Covered Individual if the Administrator determines that such forfeiture and/or recovery would be impracticable due to any of the
following circumstances: (i) the direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered (following
reasonable attempts by the Company to recover such Erroneously Awarded Compensation, the documentation of such attempts, and the provision of such
documentation to the Nasdaq); or (ii) recovery would likely cause any otherwise tax-qualified retirement plan, under which benefits are broadly available to
employees, to fail to meet the requirements of Sections 401(a)(13) or 411(a) of the Code.
A-3
E. Notwithstanding anything in this Section V to the contrary, the Company has no obligation to seek recoupment of amounts that are granted,
vested, or earned based solely upon the occurrence or non-occurrence of non-financial events. Such exempt compensation includes, without limitation, base
salary; time-vesting awards; compensation awarded on the basis of the achievement of metrics that are not Financial Reporting Measures; and
compensation awarded solely at the discretion of the Administrator, the Board, or a group composed entirely of independent members of the Board;
provided that such amounts are in no way contingent on, and were not in any way granted on the basis of, the achievement of any Financial Reporting
Measure.
F. The provisions of this Section V applicable to Executive Officers are intended to comply with Section 10D of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and Listing Rule 5608 of The Nasdaq Stock Market LLC (“Nasdaq”). This Section V shall be interpreted in a
manner that satisfies such requirements and the Policy shall be operated accordingly. If any provision of the Policy would otherwise frustrate or conflict
with this intent, the provision shall be interpreted and deemed amended so as to avoid such conflict.
VI. Recoupment Upon Misconduct. If the Administrator determines that any Covered Individual has engaged in embezzlement, fraud, theft or any other
financial misconduct, the Administrator may require, to the extent and to the amount determined in the Administrator’s sole discretion: (a) cancellation,
rescission or repayment of any Incentive-Based Compensation (whether cash or equity related) granted to, earned by, or paid to the Covered Individual and
(b) cancellation or rescission of outstanding equity awards (whether vested or unvested) and repayment of any gains realized on the exercise, settlement or
sale of equity awards received by such Covered Individual, in either case, which has been granted or paid to or earned or realized by the Covered Individual
at any time during the three-consecutive-year period ending on the date on which such embezzlement, fraud, theft or any other financial misconduct is
discovered.
VII. No Indemnification for Executive Officers. Notwithstanding the terms of any indemnification agreement, insurance policy or contractual
arrangement with an Executive Officer that may be interpreted to the contrary, the Company shall not indemnify any Executive Officer (or, for the
avoidance of doubt, former Executive Officer) against the loss of any Erroneously Awarded Compensation.
VIII. Effective Date. This Policy shall be effective as of October [ ], 2023.
IX. No Limitation on Other Rights. The rights of the Company under the Policy to seek forfeiture or reimbursement are in addition to, and not in lieu
of, any rights of recoupment, or remedies or rights other than recoupment, that may be available to the Company pursuant to the terms of any law,
government regulation, or stock exchange listing requirement or any other policy, plan, or agreement of the Company; provided, however, that any amounts
recouped under any other policy that would be recoupable under the Policy shall count toward any required recoupment under the Policy and vice versa.
X. Sarbanes-Oxley. Notwithstanding anything herein to the contrary, the Company’s Chief Executive Officer and Chief Financial Officer remain subject
to the recoupment requirements of Section 304 of the Sarbanes-Oxley Act of 2002 (“SOX”). If any such recoupment under Section 304 of SOX occurs, the
amounts payable by the Chief Executive Officer and Chief Financial Officer under SOX will be offset against any amount owed to the Company under this
Policy.
A-4
XI. Full Enforcement. The provisions in the Policy are intended to be applied to the fullest extent of the law. To the extent that any provision of the
Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted and shall
automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to applicable law. The invalidity or
unenforceability of any provision of the Policy shall not affect the validity or enforceability of any other provision of the Policy.
XII. Prior Policy. The Policy replaces the Prior Policy. Any Performance-Based Incentive Compensation (as defined in the Prior Policy) that is received
by a Covered Individual before the Effective Date shall be subject to the terms of the Prior Policy.
XIII. Incorporation into Plans and Award Agreements. From and after the adoption of this Policy, each award agreement or other document setting
forth the terms and conditions of any grant of Incentive Compensation to a Covered Individual shall include a provision incorporating the requirements of
the Policy.
A-5
RUSH ENTERPRISES, INC. AMENDED AND RESTATED 2007 LONG-TERM
INCENTIVE PLAN
FORM OF RESTRICTED STOCK AWARD AGREEMENT
Exhibit 10.6
Employee:
Grant Date:
Number of Shares of Restricted Stock:
Vesting Schedule/Restricted Period:
[ ]
[ ]
[ ]
[ ]
1. Grant of Restricted Stock Award. Rush Enterprises, Inc. (the “Company”), pursuant to the Rush Enterprises, Inc. Amended and Restated 2007
Long-Term Incentive Plan (as amended, restated, supplemented or modified from time to time, the “Plan”), hereby awards to you, the above-named
Employee, effective as of the Grant Date set forth above (the “Grant Date”), as a matter of separate inducement but not in lieu of any salary or other
compensation for your services for the Company, an award (the “Award”) consisting of the number of shares of restricted stock set forth set forth above
(the “Restricted Shares”), on the terms and conditions set forth in this Agreement and the Plan. All of the Restricted Shares will be subject to the
prohibition on the transfer of the Restricted Shares and the obligations to forfeit the Restricted Shares to the Company as set forth in Section 3 of this
Agreement (“Forfeiture Restrictions”).
2. Issuance of Shares; Ownership.
(a) Issuance of Shares. Effective as of the Grant Date, the Committee or its designated representative shall cause a number of Shares
equal to the number of Restricted Shares to be issued and registered in the Employee’s name, subject to the conditions and restrictions set forth in this
Restricted Stock Award Agreement (this “Award Agreement”) and the Plan. Such issuance and registration shall be evidenced by an entry on the registry
books of the Company and, until the applicable Restricted Shares have vested, the Restricted Shares shall remain subject to the conditions and restrictions
set forth in this Restricted Stock Award Agreement and the Plan (the “Transfer and Forfeiture Restrictions”). The Employee shall not be entitled to release
of such Transfer and Forfeiture Restrictions for any portion of the Restricted Shares unless and until the related Restricted Shares have vested pursuant to
Section 3 of this Award Agreement. In the event the Restricted Shares are forfeited in full or in part, the Employee hereby consents to the relinquishment of
the forfeited Restricted Shares issued and registered in the Employee’s name to the Company at that time.
(b) Ownership of Shares. Subject to the restrictions set forth in the Plan and this Agreement, the Participant shall possess all incidents
of ownership of the shares of Restricted Stock, including, without limitation, (i) the right to vote such shares of Restricted Stock, and (ii) subject to Section
2(c), the right to receive dividends with respect to such shares of Restricted Stock of (but only to the extent declared and paid to holders of shares by the
Company in its sole discretion), provided, however, that any such dividends shall be treated, to the extent required by applicable law, as additional
compensation for tax purposes if paid on the shares Restricted Stock.
(c) Dividends. Any dividends with respect to the Restricted Stock (whether such dividends are paid in cash, stock or other property): (i)
shall be subject to the same Transfer and Forfeiture Restrictions as the Restricted Stock with respect to which they are issued; (ii) shall herein be
encompassed within the term “Restricted Stock”; (iii) may be held by the Company for the Participant prior to vesting; and (iv) if so held by the Company,
shall be paid or otherwise released to the Participant, without interest, promptly after the vesting of the Restricted Stock with respect to which they were
issued.
3. Vesting and Forfeiture of Restricted Shares.
(a) Lapse of Forfeiture Restrictions. Subject to Section 3(b) and Section 3(c), The Restricted Shares will vest and the Transfer and
Forfeiture Restrictions will lapse on the date(s) provided in Vesting Schedule/Restricted Period set forth above; provided, however, that the Employee must
be in continuous employment or service from the Grant Date through each applicable vesting date in order for the Restricted Shares to vest on such date.
(b) Death, Disability or Retirement. If the Employee’s employment terminates due to his or her death, Disability or Retirement (defined
as termination by the Employee of the Employee’s employment relationship with the Company or any of its Subsidiaries after 10 years of employment with
the Company and attaining the age of 60), the Transfer and Forfeiture Restrictions on the Restricted Shares granted hereunder (unless previously terminated
pursuant to Section 3(c)) will lapse pursuant to the following: (i) in the case of termination due to death or Disability, the Transfer and Forfeiture
Restrictions will lapse with respect to 100% of the Restricted Shares immediately upon termination; or (ii) in the case of termination due to Retirement, for
so long as Employee does not become employed by a “competitor” of the Company, the Employee shall be deemed to be continuing to provide services to
the Company following the Employee’s termination and the Transfer and Forfeiture Restrictions shall continue to lapse pursuant to Section 3(a) or, if
applicable, Section 3(c). A determination as to whether the Employee has become employed by a “competitor,” and the definition of “competitor,” shall be
made by the Committee, in its sole discretion. In the event Employee becomes employed by a “competitor,” then Employee’s continuous, eligible service to
the Company will be deemed to terminate on the date Employee is employed by a “competitor” and the Employee will immediately forfeit all then
unvested Restricted Shares subject to this Award shall, for no consideration, forfeit any right to any unvested Restricted Shares subject to this Award.
Restricted Shares, if any, that are unvested and outstanding as of immediately prior to such Change in Control.
(c) Change of Control. If a Change of Control occurs the Transfer and Forfeiture Restrictions will lapse with respect to 100% of the
(d) Forfeiture of Restricted Shares. If the Employee ceases to be employed by or provide services to the Company and its Subsidiaries
prior to the date that the Transfer and Forfeiture Restrictions lapse (the “Restriction Lapse Date”) for any reason other than the Employee’s death or
Disability, or if Employee (or Employee’s estate) initiates a legal proceeding against the Company other than pursuant to the terms of Section 5(b), then the
Employee (or the Employee’s estate, as applicable) shall, for no consideration, forfeit any right to any unvested Restricted Shares subject to this Award.
Notwithstanding the foregoing, the Committee or its designee may, in the Committee’s or the designee’s sole and absolute discretion, as applicable, provide
for the acceleration of the vesting of the Restricted Shares, eliminate or make less restrictive any restrictions contained in this Agreement, waive any
restriction or other provision of the Plan or this Agreement or otherwise amend or modify this Agreement in any manner that is either (i) not adverse to
Employee, or (ii) consented to by Employee.
- 2 -
4. Effect of the Plan. The Restricted Shares awarded to Employee are subject to all of the terms and conditions of the Plan, which terms and
conditions are incorporated herein for all purposes, and of this Agreement together with all rules and determinations from time to time issued by the
Committee and by the Board pursuant to the Plan. The Company hereby reserves the right to amend, modify, restate, supplement or terminate the Plan
without the consent of Employee, so long as such amendment, modification, restatement or supplement does not materially reduce the rights and benefits
available to Employee hereunder, and this Award will be subject, without further action by the Company or Employee, to such amendment, modification,
restatement or supplement unless provided otherwise therein. The Company further reserves the right to amend, modify, restate, supplement or terminate
the Plan and this Agreement without the consent of Employee in order to comply with any applicable law, regulation, or Company policy, including any
law, regulation, or policy that could require forfeiture of this Award or cancellation of any stock issued pursuant to this Award. Capitalized terms used but
not defined in this Agreement have the meanings ascribed to such terms in the Plan.
5. Restrictions. Employee hereby accepts the Award of Restricted Shares and agrees with respect thereto as follows:
Shares vest as described in Section 3.
(a) No Transfer. The Restricted Shares shall not be sold, pledged, assigned, transferred, or encumbered prior to the time the Restricted
(b) Mandatory Mediation and Arbitration Procedure. By execution of this Agreement and acceptance of this Award, which is a
voluntary benefit provided to the Employee by the Company, the Employee waives the Employee’s right to a jury trial in state or federal court and agrees
that disputes arising under this Agreement must first be submitted for non-binding mediation before a neutral third party. If a dispute remains unresolved at
the conclusion of the mediation process, either party may submit the dispute for resolution by final binding arbitration. The arbitrator shall have the
authority to allow for appropriate discovery and exchange of information prior to a hearing, including (but not limited to) production of documents,
information requests, depositions, and subpoenas. By execution of this Agreement, however, the Employee does not waive the Employee’s right to any
normally available remedies the Employee may have in connection with any claim the Employee may bring against the Company, as an arbitrator can
award any normal remedies the Employee could get in a court proceeding. By execution of this Agreement, the Employee represents that, to the extent the
Employee considered necessary, the Employee has sought, at the Employee’s own expense, counsel regarding the terms of this Agreement and the waiver
contemplated in this Section 5(b). If this arbitration provision is found inapplicable, then either party may file suit and each party agrees that any suit,
action, or proceeding arising out of or relating to this Agreement shall be brought in the United States District Court for the Western District of Texas (or
should such court lack jurisdiction to hear such action, suit or proceeding, in a Texas State court in Bexar County, Texas) and that the parties shall submit to
the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection a party may have to the laying of venue
for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE
TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.
6. Tax Withholding. The Company may require Employee to pay to the Company an amount the Company deems appropriate to satisfy its
current or future obligation to withhold federal, state or local income or other taxes that you incur as a result of the Award. With respect to any required tax
withholding, you may: (a) direct the Company to withhold from the Shares to be issued to you under this Agreement a sufficient number of Shares to
satisfy such withholding, which determination will be based on the Shares’ Fair Market Value at the time such determination is made; (b) deliver to the
Company a number of Shares sufficient to satisfy such withholding, based on the Shares’ Fair Market Value at the time such determination is made; (c)
direct the Company to withhold from your wages or other cash compensation paid to you by the Company; or (d) deliver cash to the Company sufficient to
satisfy such withholding obligations. If you desire to elect to use the stock withholding option described in subparagraph (a), you must make the election at
the time and in the manner the Company prescribes. The Company, in its discretion, may deny your request to satisfy tax withholding using a method
described under subparagraph (a) or (b). In the event the Company determines that the aggregate Fair Market Value of the Shares withheld as payment of
any tax withholding is insufficient to discharge its tax withholding obligation, then you must pay to the Company, in cash, the amount of that deficiency
immediately upon the Company’s request
- 3 -
7. Tax Advice. Employee acknowledges that the tax consequences associated with the Award are complex and that the Company has urged
Employee to review with Employee’s own tax advisors the federal, state, and local tax consequences of this Award. Employee is relying solely on such
advisors and not on any statements or representations of the Company or any of its agents. Employee understands that Employee (and not the Company)
shall be responsible for Employee’s own tax liability that may arise as a result of this Agreement.
8. Section 83(b) Election. If the Employee makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Shares as
of the date of transfer of the Restricted Shares rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a)
of the Code, the Employee hereby agrees to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue
Service.
9. Sale of Securities. Any Shares awarded hereunder may not be sold or otherwise disposed of in any manner that would constitute a violation of
any applicable federal or state securities laws or any provisions of the Company’s Insider Trading Policy. You agree that (a) the Company may refuse to
cause the transfer of such Shares to be registered on the stock register of the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable federal or state securities law and (b) the Company may give related instructions to the
transfer agent, if any, to stop registration of the transfer of such Shares.
10. Governing Law. The laws of the State of Texas shall govern the interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflict of laws.
11. Authorization to Release Necessary Personal Information.
The Employee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Employee’s
personal data as described in this Agreement and any other Award grant materials (“Data”) by and among, as applicable, the Company and its
Subsidiaries for the exclusive purpose of implementing, administering and managing the Employee’s participation in the Plan.
The Employee understands that the Company may hold certain personal information about the Employee, including, but not limited to, the
Employee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job
title, any Shares or directorships held in the Company, details of all Restricted Shares or any other entitlement to Shares awarded, canceled, exercised,
vested, unvested or outstanding in the Employee’s favor, for the exclusive purpose of implementing, administering and managing the Plan.
12. Community Interest of Spouse. The community interest, if any, of any spouse of Employee in any of the Restricted Shares shall be subject to
all of the terms, conditions and restrictions of this Agreement and the Plan, and shall be forfeited and surrendered to the Company upon the occurrence of
any of the events requiring Employee’s interest in such Restricted Shares to be so forfeited and surrendered pursuant to this Agreement.
- 4 -
13. Compliance.
(a) Conformity to Securities Laws. The Employee acknowledges that the Plan and this Agreement are intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, and State securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the
Award is granted only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this
Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
(b) Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Employee
is subject to Section 16 of the Exchange Act, the Plan and this Agreement shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform
to such applicable exemptive rule.
14. Clawback. By your signature below, you hereby acknowledge and agree that (a) the Restricted Shares shall be subject to the clawback
provisions contained in Section 14.3 of the Plan, and (b) you have received a copy of, read, understand and accept the terms of the Company’s Clawback
Policy (as amended and restated October 23, 2023), as such policy is attached hereto as Exhibit A.
15. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the
Plan by electronic means. The Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an
online or electronic system established and maintained by the Company or a third party designated by the Company.
16. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
{Signature Page Follows}
- 5 -
EMPLOYEE ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT OR THE PLAN CONFERS UPON EMPLOYEE
ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF EMPLOYEE’S EMPLOYMENT WITH OR SERVICE TO THE
COMPANY. Employee acknowledges receipt of a copy of the Plan, represents that he or she is familiar with the terms and provisions thereof, and hereby
accepts this Award subject to all of the terms and provisions hereof and thereof. Employee has reviewed this Agreement and the Plan in their entirety, has
had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understands all provisions of this Agreement and the Plan.
RUSH ENTERPRISES, INC.
EMPLOYEE
By:
Print Name:
Title:
Address:
W.M. “Rusty” Rush
Chief Executive Officer and President
555 IH 35 South, Suite 500
New Braunfels, Texas 78130
By:
Print Name:
.
Address:
Date:
______________ __, 20__
- 6 -
EXHIBIT A
Rush Enterprises, Inc. Clawback Policy
As Amended and Restated October 23, 2023
I. Adoption. This Rush Enterprises, Inc. Clawback Policy (the “Policy”) is hereby adopted by the Board of Directors (the “Board”) of Rush Enterprises,
Inc. (the “Company”) on October 23, 2023. This Policy amends and restates the Company’s Clawback Policy dated February 15, 2021 (the “Prior
Policy”).
II. Administration. The Policy will be administered by the non-management members of the Board or a committee thereof, or, if so delegated by the
non-management members of the Board, by the Compensation Committee of the Board (as applicable, the “Administrator”). The Administrator shall have
full and final authority to make all determinations under the Policy, including without limitation whether the Policy applies and if so, the amount of
compensation to be repaid or forfeited by a Covered Individual. All determinations and decisions made by the Administrator pursuant to the provisions of
this Policy shall be final, conclusive and binding on all persons, including the Company, its subsidiaries, its stockholders and employees.
III. Definitions. As used in this Policy, the following definitions shall apply:
A.“ Accounting Restatement” means an accounting restatement of the Company’s financial statements due to the Company’s material
noncompliance with any financial reporting requirement under the federal securities laws, including any required accounting restatement to correct an error
in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the
error were corrected in the current period or left uncorrected in the current period.
For purposes of the policy, an Accounting Restatement shall not be deemed to occur in the event of a revision of the Company’s financial
statements due to an out-of-period adjustment (i.e., when the error is immaterial to the previously issued financial statements and the correction of the error
is also immaterial to the current period) or a retrospective (i) application of a change in accounting principles, (ii) revision to reportable segment
information due to a change in the structure of the Company’s internal organization, (iii) reclassification due to a discontinued operation, (iv) application of
a change in reporting entity, such as from a reorganization of entities under common control, or (v) revision for stock splits, reverse stock splits, stock
dividends, or other changes in capital structure.
B.“ Administrator” has the meaning set forth in Section II hereof.
C.“ Applicable Period” means the three (3) completed fiscal years immediately preceding the date on which the Company is required to prepare
an Accounting Restatement, as well as any transition period (that results from a change in the Company’s fiscal year) within or immediately following
those three completed fiscal years (except that a transition period that comprises a period of at least nine (9) months shall count as a completed fiscal year).
The “date on which the Company is required to prepare an Accounting Restatement” is the earlier to occur of (i) the date the Board concludes, or
reasonably should have concluded, that the Company is required to prepare an Accounting Restatement or (ii) the date a court, regulator or other legally
authorized body directs the Company to prepare an Accounting Restatement, in each case, regardless of if or when the restated financial statements are
filed.
A-1
D.“ Board” has the meaning set forth in Section I hereof.
E.“ Code” means the Internal Revenue Code of 1986, as amended.
F.“ Company” has the meaning set forth in Section I hereof.
G.“ Covered Compensation” means any Incentive-Based Compensation granted, vested, or paid to a Covered Individual at any time during the
performance period for the Incentive-Based Compensation and that was received (i) on or after the Effective Date, (ii) after the person became a Covered
Individual, and (iii) at a time that the Company had a class of securities listed on a U.S. national securities exchange. For purposes of the policy, Incentive-
Based Compensation is deemed “received” in the Company’s fiscal period during which the Financial Reporting Measure specified in or otherwise relating
to the Incentive-Based Compensation award is attained, even if the grant, vesting, or payment of the Incentive-Based Compensation occurs after the end of
that period.
H.“ Covered Individual” means any Executive Officer and any Other Covered Employee.
I.“ Erroneously Awarded Compensation” means the amount of Covered Compensation granted, vested, or paid to a person during the fiscal
period when the applicable Financial Reporting Measure relating to such Covered Compensation was attained that exceeds the amount of Covered
Compensation that otherwise would have been granted, vested, or paid to the person had such amount been determined based on the applicable Accounting
Restatement, computed without regard to any taxes paid (i.e., on a pre-tax basis). For Covered Compensation based on stock price or total stockholder
return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in an
Accounting Restatement, the Administrator will determine the amount of such Covered Compensation that constitutes Erroneously Awarded
Compensation, if any, based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total stockholder return upon which
the Covered Compensation was granted, vested, or paid and the Administrator shall maintain documentation of such determination and provide such
documentation to Nasdaq.
J.“ Exchange Act” has the meaning set forth in Section V.F.
K.“ Executive Officer” means those persons who are designated by the Board as an “officer” of the Company as such term is defined in Rule
16a-1(f) under the Exchange Act. Both current and former Executive Officers are subject to the Policy in accordance with its terms.
L.“ Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures. Stock price and total shareholder
return are also financial reporting measures. A financial reporting measure need not be presented within the financial statements or included in a filing with
the Securities and Exchange Commission.
M.“ Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of
a Financial Reporting Measure. For purposes of this Policy, “Incentive-Based Compensation” shall also be deemed to include any amounts which were
determined based on (or were otherwise calculated by reference to) Incentive-Based Compensation (including, without limitation, any amounts under any
long-term disability, life insurance, or supplemental retirement or severance plan or agreement or any notional account that is based on Incentive-Based
Compensation, as well as any earnings accrued thereon).
A-2
N.“ Nasdaq” has the meaning set forth in Section V.F.
O.“ Other Covered Employee” means any employee of the Company or any subsidiary of the Company who (i) is not an Executive Officer and
(ii) is or becomes a participant in the Company’s equity incentive plan (currently the Rush Enterprises, Inc. Amended and Restated 2007 Long-Term
Incentive Plan) on or after the Effective Date. A person who is or becomes an Other Covered Employee will cease to be an Other Covered Employee on the
earlier of (x) the date that is three (3) years after the date such person ceases to be a participant in the Company’s equity incentive plan or (y) the date that is
three years following the date that such person ceases to be an employee of the Company or any subsidiary of the Company.
IV. Coverage. The Policy will apply to all Covered Individuals.
V. Recoupment Upon Restatement of Financial Statements.
A. In the event of an Accounting Restatement, any Erroneously Awarded Compensation received by an Executive Officer during the Applicable
Period prior to the Accounting Restatement (i) that is then-outstanding but has not yet been paid shall be automatically and immediately forfeited and (ii)
that has been paid to an Executive Officer shall be subject to reasonably prompt repayment to the Company. The Administrator must pursue (and shall not
have the discretion to waive) the forfeiture and/or repayment of such Erroneously Awarded Compensation received by an Executive Officer, except as
provided in Section V.D. below.
B. If, in the event of an Accounting Restatement, the Administrator determines that an Other Covered Employee’s fraud or intentional
misconduct directly related to such Accounting Restatement, then, unless otherwise determined by the Administrator in its discretion, any Erroneously
Awarded Compensation received by such Other Covered Employee during the Applicable Period prior to the Accounting Restatement (i) that is then-
outstanding but has not yet been paid shall be automatically and immediately forfeited and (ii) that has been paid to the Other Covered Employee shall be
subject to reasonably prompt repayment to the Company.
C. In the event that the Administrator determines that any person shall repay any Erroneously Awarded Compensation pursuant to this Section V,
the Administrator shall provide written notice to such person by email or certified mail to the physical address on file with the Company for such person,
and the person shall satisfy such repayment in a manner and on such terms as required by the Administrator, and the Company shall be entitled to set off
the repayment amount against any amount owed to the person by the Company, to require the forfeiture of any award granted by the Company to the
person, or to take any and all necessary actions to reasonably promptly recoup the repayment amount from the person, in each case, to the fullest extent
permitted under applicable law, including, without limitation, Section 409A of the Code. If the Administrator does not specify a repayment timing in the
written notice described above, the applicable person shall be required to repay the Erroneously Awarded Compensation to the Company by wire, cash, or
cashier’s check no later than thirty (30) days after receipt of such notice.
A-3
D. Notwithstanding the foregoing, the Administrator may determine not to pursue the forfeiture and/or recovery of Erroneously Awarded
Compensation from any Covered Individual if the Administrator determines that such forfeiture and/or recovery would be impracticable due to any of the
following circumstances: (i) the direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered (following
reasonable attempts by the Company to recover such Erroneously Awarded Compensation, the documentation of such attempts, and the provision of such
documentation to the Nasdaq); or (ii) recovery would likely cause any otherwise tax-qualified retirement plan, under which benefits are broadly available to
employees, to fail to meet the requirements of Sections 401(a)(13) or 411(a) of the Code.
E. Notwithstanding anything in this Section V to the contrary, the Company has no obligation to seek recoupment of amounts that are granted,
vested, or earned based solely upon the occurrence or non-occurrence of non-financial events. Such exempt compensation includes, without limitation, base
salary; time-vesting awards; compensation awarded on the basis of the achievement of metrics that are not Financial Reporting Measures; and
compensation awarded solely at the discretion of the Administrator, the Board, or a group composed entirely of independent members of the Board;
provided that such amounts are in no way contingent on, and were not in any way granted on the basis of, the achievement of any Financial Reporting
Measure.
F. The provisions of this Section V applicable to Executive Officers are intended to comply with Section 10D of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and Listing Rule 5608 of The Nasdaq Stock Market LLC (“Nasdaq”). This Section V shall be interpreted in a
manner that satisfies such requirements and the Policy shall be operated accordingly. If any provision of the Policy would otherwise frustrate or conflict
with this intent, the provision shall be interpreted and deemed amended so as to avoid such conflict.
VI. Recoupment Upon Misconduct. If the Administrator determines that any Covered Individual has engaged in embezzlement, fraud, theft or any other
financial misconduct, the Administrator may require, to the extent and to the amount determined in the Administrator’s sole discretion: (a) cancellation,
rescission or repayment of any Incentive-Based Compensation (whether cash or equity related) granted to, earned by, or paid to the Covered Individual and
(b) cancellation or rescission of outstanding equity awards (whether vested or unvested) and repayment of any gains realized on the exercise, settlement or
sale of equity awards received by such Covered Individual, in either case, which has been granted or paid to or earned or realized by the Covered Individual
at any time during the three-consecutive-year period ending on the date on which such embezzlement, fraud, theft or any other financial misconduct is
discovered.
VII. No Indemnification for Executive Officers. Notwithstanding the terms of any indemnification agreement, insurance policy or contractual
arrangement with an Executive Officer that may be interpreted to the contrary, the Company shall not indemnify any Executive Officer (or, for the
avoidance of doubt, former Executive Officer) against the loss of any Erroneously Awarded Compensation.
VIII. Effective Date. This Policy shall be effective as of October 2, 2023.
IX. No Limitation on Other Rights. The rights of the Company under the Policy to seek forfeiture or reimbursement are in addition to, and not in lieu
of, any rights of recoupment, or remedies or rights other than recoupment, that may be available to the Company pursuant to the terms of any law,
government regulation, or stock exchange listing requirement or any other policy, plan, or agreement of the Company; provided, however, that any amounts
recouped under any other policy that would be recoupable under the Policy shall count toward any required recoupment under the Policy and vice versa.
A-4
X. Sarbanes-Oxley. Notwithstanding anything herein to the contrary, the Company’s Chief Executive Officer and Chief Financial Officer remain subject
to the recoupment requirements of Section 304 of the Sarbanes-Oxley Act of 2002 (“SOX”). If any such recoupment under Section 304 of SOX occurs, the
amounts payable by the Chief Executive Officer and Chief Financial Officer under SOX will be offset against any amount owed to the Company under this
Policy.
XI. Full Enforcement. The provisions in the Policy are intended to be applied to the fullest extent of the law. To the extent that any provision of the
Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted and shall
automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to applicable law. The invalidity or
unenforceability of any provision of the Policy shall not affect the validity or enforceability of any other provision of the Policy.
XII. Prior Policy. The Policy replaces the Prior Policy. Any Performance-Based Incentive Compensation (as defined in the Prior Policy) that is received
by a Covered Individual before the Effective Date shall be subject to the terms of the Prior Policy.
XIII. Incorporation into Plans and Award Agreements. From and after the adoption of this Policy, each award agreement or other document setting
forth the terms and conditions of any grant of Incentive Compensation to a Covered Individual shall include a provision incorporating the requirements of
the Policy.
A-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, 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, Otay Mesa
Rush Peterbilt Truck Center, Otay Mesa
Rush Truck Center, San Diego
Rush Peterbilt Truck Center, San Diego
Rush Truck Center, Sylmar
Rush Peterbilt Truck Center, Sylmar
Rush Truck Center, Ventura
Rush Peterbilt Truck Center, Ventura
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 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
Rush Truck Centers of Illinois, Inc.
Delaware
Rush Truck Centers of Indiana, Inc.
Rush Truck Centers of Kansas, Inc.
Rush Truck Centers of Kentucky, Inc.
Rush Truck Centers of Missouri, Inc.
Rush Truck Centers of Nebraska, Inc.
Rush Truck Centers of Nevada, Inc.
Rush Truck Centers of New Mexico, Inc.
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Rush Truck Centers of North Carolina, Inc.
Delaware
Rush Truck Centers of Ohio, Inc.
Delaware
House of Trucks, Willowbrook
Rush Truck Center, Bloomington
Rush Truck Center, Carol Stream
Rush Truck Center, Champaign
Rush Truck Center, Chicago
Rush Truck Center, Chicago Light and Medium Duty
Rush Truck Center, Effingham
Rush Truck Center, Elk Grove
Rush Truck Center, Huntley
Rush Truck Center, Joliet
Rush Truck Center, Quincy
Rush Truck Center, Pontoon Beach
Rush Truck Center, Springfield
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. Peters
Rush Truck Center, Springfield
Rush Truck Center, West Plains
Rush Truck Center, Grand Island
Rush Truck Center, North Platte
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
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 West
Rush Truck Center, Nashville
Rush Peterbilt Truck Center, Nashville
Rush Towing Systems, Nashville
Rush Truck Centers of Texas, L.P.
Texas
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 Peterbilt 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 Bus Center, Dallas #2
Rush Truck Center, Dallas Light and Medium Duty
Rush Truck Center, Dallas Medium Duty
Rush Truck Center, Dallas South
Rush Truck Center, Dallas TRP
Rush Peterbilt Truck Center, Dallas South
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 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 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 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 Trucks, 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
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
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,
5. Form S-8 No. 333-138556 pertaining to the Rush Enterprises, Inc. 2006 Non-Employee Director Stock Plan, and
6. Form S-8 No. 333-275820 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.
of our reports dated February 23, 2024, 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, 2023.
/s/ Ernst & Young LLP
San Antonio, Texas
February 23, 2024
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, 2024
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, 2024
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, 2023 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
Date: February 23, 2024
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, 2023 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: Chief Financial Officer and
Treasurer
Date: February 23, 2024
Rush Enterprises, Inc. Clawback Policy
As Amended and Restated October 23, 2023
Exhibit 97.1
I. Adoption. This Rush Enterprises, Inc. Clawback Policy (the “Policy”) is hereby adopted by the Board of Directors (the “Board”) of Rush Enterprises,
Inc. (the “Company”) on October 23, 2023. This Policy amends and restates the Company’s Clawback Policy dated February 15, 2021 (the “Prior
Policy”).
II. Administration. The Policy will be administered by the non-management members of the Board or a committee thereof, or, if so delegated by the
non-management members of the Board, by the Compensation Committee of the Board (as applicable, the “Administrator”). The Administrator shall have
full and final authority to make all determinations under the Policy, including without limitation whether the Policy applies and if so, the amount of
compensation to be repaid or forfeited by a Covered Individual. All determinations and decisions made by the Administrator pursuant to the provisions of
this Policy shall be final, conclusive and binding on all persons, including the Company, its subsidiaries, its stockholders and employees.
III. Definitions. As used in this Policy, the following definitions shall apply:
A.“ Accounting Restatement” means an accounting restatement of the Company’s financial statements due to the Company’s material
noncompliance with any financial reporting requirement under the federal securities laws, including any required accounting restatement to correct an error
in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the
error were corrected in the current period or left uncorrected in the current period.
For purposes of the policy, an Accounting Restatement shall not be deemed to occur in the event of a revision of the Company’s financial
statements due to an out-of-period adjustment (i.e., when the error is immaterial to the previously issued financial statements and the correction of the error
is also immaterial to the current period) or a retrospective (i) application of a change in accounting principles, (ii) revision to reportable segment
information due to a change in the structure of the Company’s internal organization, (iii) reclassification due to a discontinued operation, (iv) application of
a change in reporting entity, such as from a reorganization of entities under common control, or (v) revision for stock splits, reverse stock splits, stock
dividends, or other changes in capital structure.
B.“ Administrator” has the meaning set forth in Section II hereof.
C.“ Applicable Period” means the three (3) completed fiscal years immediately preceding the date on which the Company is required to prepare
an Accounting Restatement, as well as any transition period (that results from a change in the Company’s fiscal year) within or immediately following
those three completed fiscal years (except that a transition period that comprises a period of at least nine (9) months shall count as a completed fiscal year).
The “date on which the Company is required to prepare an Accounting Restatement” is the earlier to occur of (i) the date the Board concludes, or
reasonably should have concluded, that the Company is required to prepare an Accounting Restatement or (ii) the date a court, regulator or other legally
authorized body directs the Company to prepare an Accounting Restatement, in each case, regardless of if or when the restated financial statements are
filed.
D.“ Board” has the meaning set forth in Section I hereof.
E.“ Code” means the Internal Revenue Code of 1986, as amended.
F.“ Company” has the meaning set forth in Section I hereof.
G.“ Covered Compensation” means any Incentive-Based Compensation granted, vested, or paid to a Covered Individual at any time during the
performance period for the Incentive-Based Compensation and that was received (i) on or after the Effective Date, (ii) after the person became a Covered
Individual, and (iii) at a time that the Company had a class of securities listed on a U.S. national securities exchange. For purposes of the policy, Incentive-
Based Compensation is deemed “received” in the Company’s fiscal period during which the Financial Reporting Measure specified in or otherwise relating
to the Incentive-Based Compensation award is attained, even if the grant, vesting, or payment of the Incentive-Based Compensation occurs after the end of
that period.
H.“ Covered Individual” means any Executive Officer and any Other Covered Employee.
I.“ Erroneously Awarded Compensation” means the amount of Covered Compensation granted, vested, or paid to a person during the fiscal
period when the applicable Financial Reporting Measure relating to such Covered Compensation was attained that exceeds the amount of Covered
Compensation that otherwise would have been granted, vested, or paid to the person had such amount been determined based on the applicable Accounting
Restatement, computed without regard to any taxes paid (i.e., on a pre-tax basis). For Covered Compensation based on stock price or total stockholder
return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in an
Accounting Restatement, the Administrator will determine the amount of such Covered Compensation that constitutes Erroneously Awarded
Compensation, if any, based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total stockholder return upon which
the Covered Compensation was granted, vested, or paid and the Administrator shall maintain documentation of such determination and provide such
documentation to Nasdaq.
J.“ Exchange Act” has the meaning set forth in Section V.F.
K.“ Executive Officer” means those persons who are designated by the Board as an “officer” of the Company as such term is defined in Rule
16a-1(f) under the Exchange Act. Both current and former Executive Officers are subject to the Policy in accordance with its terms.
L.“ Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures. Stock price and total shareholder
return are also financial reporting measures. A financial reporting measure need not be presented within the financial statements or included in a filing with
the Securities and Exchange Commission.
M.“ Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of
a Financial Reporting Measure. For purposes of this Policy, “Incentive-Based Compensation” shall also be deemed to include any amounts which were
determined based on (or were otherwise calculated by reference to) Incentive-Based Compensation (including, without limitation, any amounts under any
long-term disability, life insurance, or supplemental retirement or severance plan or agreement or any notional account that is based on Incentive-Based
Compensation, as well as any earnings accrued thereon).
N.“ Nasdaq” has the meaning set forth in Section V.F.
O.“ Other Covered Employee” means any employee of the Company or any subsidiary of the Company who (i) is not an Executive Officer and
(ii) is or becomes a participant in the Company’s equity incentive plan (currently the Rush Enterprises, Inc. Amended and Restated 2007 Long-Term
Incentive Plan) on or after the Effective Date. A person who is or becomes an Other Covered Employee will cease to be an Other Covered Employee on the
earlier of (x) the date that is three (3) years after the date such person ceases to be a participant in the Company’s equity incentive plan or (y) the date that is
three years following the date that such person ceases to be an employee of the Company or any subsidiary of the Company.
IV. Coverage. The Policy will apply to all Covered Individuals.
V. Recoupment Upon Restatement of Financial Statements.
A. In the event of an Accounting Restatement, any Erroneously Awarded Compensation received by an Executive Officer during the Applicable
Period prior to the Accounting Restatement (i) that is then-outstanding but has not yet been paid shall be automatically and immediately forfeited and (ii)
that has been paid to an Executive Officer shall be subject to reasonably prompt repayment to the Company. The Administrator must pursue (and shall not
have the discretion to waive) the forfeiture and/or repayment of such Erroneously Awarded Compensation received by an Executive Officer, except as
provided in Section V.D. below.
B. If, in the event of an Accounting Restatement, the Administrator determines that an Other Covered Employee’s fraud or intentional
misconduct directly related to such Accounting Restatement, then, unless otherwise determined by the Administrator in its discretion, any Erroneously
Awarded Compensation received by such Other Covered Employee during the Applicable Period prior to the Accounting Restatement (i) that is then-
outstanding but has not yet been paid shall be automatically and immediately forfeited and (ii) that has been paid to the Other Covered Employee shall be
subject to reasonably prompt repayment to the Company.
C. In the event that the Administrator determines that any person shall repay any Erroneously Awarded Compensation pursuant to this Section V,
the Administrator shall provide written notice to such person by email or certified mail to the physical address on file with the Company for such person,
and the person shall satisfy such repayment in a manner and on such terms as required by the Administrator, and the Company shall be entitled to set off
the repayment amount against any amount owed to the person by the Company, to require the forfeiture of any award granted by the Company to the
person, or to take any and all necessary actions to reasonably promptly recoup the repayment amount from the person, in each case, to the fullest extent
permitted under applicable law, including, without limitation, Section 409A of the Code. If the Administrator does not specify a repayment timing in the
written notice described above, the applicable person shall be required to repay the Erroneously Awarded Compensation to the Company by wire, cash, or
cashier’s check no later than thirty (30) days after receipt of such notice.
D. Notwithstanding the foregoing, the Administrator may determine not to pursue the forfeiture and/or recovery of Erroneously Awarded
Compensation from any Covered Individual if the Administrator determines that such forfeiture and/or recovery would be impracticable due to any of the
following circumstances: (i) the direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered (following
reasonable attempts by the Company to recover such Erroneously Awarded Compensation, the documentation of such attempts, and the provision of such
documentation to the Nasdaq); or (ii) recovery would likely cause any otherwise tax-qualified retirement plan, under which benefits are broadly available to
employees, to fail to meet the requirements of Sections 401(a)(13) or 411(a) of the Code.
E. Notwithstanding anything in this Section V to the contrary, the Company has no obligation to seek recoupment of amounts that are granted,
vested, or earned based solely upon the occurrence or non-occurrence of non-financial events. Such exempt compensation includes, without limitation, base
salary; time-vesting awards; compensation awarded on the basis of the achievement of metrics that are not Financial Reporting Measures; and
compensation awarded solely at the discretion of the Administrator, the Board, or a group composed entirely of independent members of the Board;
provided that such amounts are in no way contingent on, and were not in any way granted on the basis of, the achievement of any Financial Reporting
Measure.
F. The provisions of this Section V applicable to Executive Officers are intended to comply with Section 10D of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and Listing Rule 5608 of The Nasdaq Stock Market LLC (“Nasdaq”). This Section V shall be interpreted in a
manner that satisfies such requirements and the Policy shall be operated accordingly. If any provision of the Policy would otherwise frustrate or conflict
with this intent, the provision shall be interpreted and deemed amended so as to avoid such conflict.
VI. Recoupment Upon Misconduct. If the Administrator determines that any Covered Individual has engaged in embezzlement, fraud, theft or any other
financial misconduct, the Administrator may require, to the extent and to the amount determined in the Administrator’s sole discretion: (a) cancellation,
rescission or repayment of any Incentive-Based Compensation (whether cash or equity related) granted to, earned by, or paid to the Covered Individual and
(b) cancellation or rescission of outstanding equity awards (whether vested or unvested) and repayment of any gains realized on the exercise, settlement or
sale of equity awards received by such Covered Individual, in either case, which has been granted or paid to or earned or realized by the Covered Individual
at any time during the three-consecutive-year period ending on the date on which such embezzlement, fraud, theft or any other financial misconduct is
discovered.
VII. No Indemnification for Executive Officers. Notwithstanding the terms of any indemnification agreement, insurance policy or contractual
arrangement with an Executive Officer that may be interpreted to the contrary, the Company shall not indemnify any Executive Officer (or, for the
avoidance of doubt, former Executive Officer) against the loss of any Erroneously Awarded Compensation.
VIII. Effective Date. This Policy shall be effective as of October [ ], 2023.
IX. No Limitation on Other Rights. The rights of the Company under the Policy to seek forfeiture or reimbursement are in addition to, and not in lieu
of, any rights of recoupment, or remedies or rights other than recoupment, that may be available to the Company pursuant to the terms of any law,
government regulation, or stock exchange listing requirement or any other policy, plan, or agreement of the Company; provided, however, that any amounts
recouped under any other policy that would be recoupable under the Policy shall count toward any required recoupment under the Policy and vice versa.
X. Sarbanes-Oxley. Notwithstanding anything herein to the contrary, the Company’s Chief Executive Officer and Chief Financial Officer remain subject
to the recoupment requirements of Section 304 of the Sarbanes-Oxley Act of 2002 (“SOX”). If any such recoupment under Section 304 of SOX occurs, the
amounts payable by the Chief Executive Officer and Chief Financial Officer under SOX will be offset against any amount owed to the Company under this
Policy.
XI. Full Enforcement. The provisions in the Policy are intended to be applied to the fullest extent of the law. To the extent that any provision of the
Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted and shall
automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to applicable law. The invalidity or
unenforceability of any provision of the Policy shall not affect the validity or enforceability of any other provision of the Policy.
XII. Prior Policy. The Policy replaces the Prior Policy. Any Performance-Based Incentive Compensation (as defined in the Prior Policy) that is received
by a Covered Individual before the Effective Date shall be subject to the terms of the Prior Policy.
XIII. Incorporation into Plans and Award Agreements. From and after the adoption of this Policy, each award agreement or other document setting
forth the terms and conditions of any grant of Incentive Compensation to a Covered Individual shall include a provision incorporating the requirements of
the Policy.