rusha20210331

rusha20210331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

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

For the transition period from to

Commission File Number 0-20797

RUSH ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

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

555 I.H. 35 South, Suite 500

New Braunfels, Texas 78130

(Address of principal executive offices)

(Zip Code)

(830) 302-5200

(Registrant’s telephone number, including area code)

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

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

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

Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller Reporting company ☐

			Emerging growth company ☐

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

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

Yes ☐ No ☑

Indicated below is the number of shares outstanding of each of the issuer’s classes of common stock, as of April 30, 2021.

Title of Class

Number of Shares

Outstanding

Class A Common Stock, $.01 Par Value

42,946,092

Class B Common Stock, $.01 Par Value

12,630,339

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

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

Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION			Page

	Item 1.	Financial Statements

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

		Consolidated Statements of Income and Comprehensive Income - For the Three Months Ended March 31, 2021 and 2020 (unaudited)	4

		Consolidated Statements of Shareholders’ Equity – For the Three Months Ended March 31, 2021 and 2020 (unaudited)	5

		Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 2021 and 2020 (unaudited)	6

		Notes to Consolidated Financial Statements (unaudited)	7

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

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

	Item 4.	Controls and Procedures	25




PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	26

	Item 1A.	Risk Factors	26

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

	Item 3.	Defaults Upon Senior Securities	26

	Item 4.	Mine Safety Disclosures	26

	Item 5.	Other Information	26

	Item 6.	Exhibits	27

SIGNATURES			28

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Shares and Per Share Amounts)

	March 31,			December 31,
	2021			2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	316,070		$	312,048
Accounts receivable, net		187,171			172,481
Inventories, net		877,876			858,291
Prepaid expenses and other		15,635			14,906
Total current assets		1,396,752			1,357,726
Property and equipment, net		1,183,437			1,203,719
Operating lease right-of-use assets, net		64,512			60,577
Goodwill, net		292,142			292,142
Other assets, net		71,580			71,229
Total assets	$	3,008,423		$	2,985,393

Liabilities and shareholders’ equity
Current liabilities:
Floor plan notes payable	$	550,304		$	511,786
Current maturities of long-term debt		135,523			141,672
Current maturities of finance lease obligations		26,448			26,373
Current maturities of operating lease obligations		10,329			10,196
Trade accounts payable		136,329			110,728
Customer deposits		42,966			74,209
Accrued expenses		126,407			151,830
Total current liabilities		1,028,306			1,026,794
Long-term debt, net of current maturities		369,587			387,982
Finance lease obligations, net of current maturities		93,584			90,740
Operating lease obligations, net of current maturities		55,229			51,155
Other long-term liabilities		34,424			34,246
Deferred income taxes, net		118,064			126,439
Shareholders’ equity:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2021 and 2020		–			–
Common stock, par value $.01 per share; 60,000,000 Class A shares and 20,000,000 Class B shares authorized; 42,885,268 Class A shares and 12,659,918 Class B shares outstanding in 2021; and 42,503,925 Class A shares and 12,470,308 Class B shares outstanding in 2020		558			551
Additional paid-in capital		449,790			437,646
Treasury stock, at cost: 12,999 Class A shares and 228,849 Class B shares in 2021; and 10,335 Class A shares and 73,437 Class B shares in 2020		(9,362	)		(2,879	)
Retained earnings		867,119			831,850
Accumulated other comprehensive income		1,124			869
Total shareholders’ equity		1,309,229			1,268,037
Total liabilities and shareholders’ equity	$	3,008,423		$	2,985,393

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

Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended March 31,
	2021		2020

Revenues
New and used commercial vehicle sales	$	747,719	$	789,554
Aftermarket products and services sales		415,737		427,978
Lease and rental		58,227		60,781
Finance and insurance		6,465		4,467
Other		3,658		3,883
Total revenue		1,231,806		1,286,663
Cost of products sold
New and used commercial vehicle sales		677,092		728,539
Aftermarket products and services sales		261,842		271,415
Lease and rental		48,058		52,208
Total cost of products sold		986,992		1,052,162
Gross profit		244,814		234,501
Selling, general and administrative expense		174,955		185,074
Depreciation and amortization expense		13,726		14,330
Gain on sale of assets		92		100
Operating income		56,225		35,197
Other income		919		1,241
Interest expense, net		507		4,769
Income before taxes		56,637		31,669
Income tax provision		11,304		8,562
Net income	$	45,333	$	23,107

Earnings per common share:
Basic	$	0.82	$	0.42
Diluted	$	0.79	$	0.41

Weighted average shares outstanding:
Basic		55,567		54,727
Diluted		57,734		55,989

Dividends declared per common share	$	0.18	$	0.09

Comprehensive income	$	45,588	$	21,177

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

Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In Thousands)

(Unaudited)

Common Stock

Accumulated

$0.01

Additional

Other

Outstanding

Par

Paid-In

Treasury

Retained

Comprehensive

Class A

Class B

Value

Capital

Stock

Earnings

Income

Total

Balance, December 31, 2020

42,504

12,470

551

437,646

(2,879

)

831,850

869

1,268,037

Stock options exercised and stock awards

298

–

5,416

–

5,419

Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

–

11,520

–

11,520

Vesting of restricted share awards

–

345

(6,780

)

–

(6,777

)

Issuance of common stock under employee stock purchase plan

–

1,988

–

1,989

Common stock repurchases

)

(155

)

–

(6,483

)

–

(6,483

)

Dividend Class A common stock

–

(7,684

)

–

(7,684

)

Dividend Class B common stock

–

(2,380

)

–

(2,380

)

Other comprehensive income

–

255

Net income

–

45,333

–

45,333

Balance, March 31, 2021

42,885

12,660

558

449,790

(9,362

)

867,119

1,124

1,309,229

Common Stock

Accumulated

$0.01

Additional

Other

Outstanding

Par

Paid-In

Treasury

Retained

Comprehensive

Class A

Class B

Value

Capital

Stock

Earnings

Income(Loss)

Total

Balance, December 31, 2019

41,930

12,360

465

397,267

(304,129

)

1,065,553

337

1,159,493

Stock options exercised and stock awards

110

–

1,421

–

1,422

Stock-based compensation related to stock options, restricted shares and employee stock purchase plan

–

8,553

–

8,553

Vesting of restricted share awards

–

337

(2,416

)

–

(2,414

)

Issuance of common stock under employee stock purchase plan

–

1,900

–

1,901

Common stock repurchases

(833

)

(81

)

–

(19,902

)

–

(19,902

)

Dividend Class A common stock

–

(3,646

)

–

(3,646

)

Dividend Class B common stock

–

(1,108

)

–

(1,108

)

Other comprehensive income (loss)

–

(1,930

)

(1,930

)

Net income

–

23,107

–

23,107

Balance, March 31, 2020

41,299

12,616

469

406,725

(324,031

)

1,083,906

(1,593

)

1,165,476

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

Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2021			2020
Cash flows from operating activities:
Net income	$	45,333		$	23,107
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		42,601			45,192
Gain on sale of property and equipment, net		(92	)		(100	)
Stock-based compensation expense related to employee stock options and employee stock purchases		11,520			8,553
Provision for deferred income tax expense		(8,375	)		(7,160	)
Change in accounts receivable, net		(14,690	)		(30,893	)
Change in inventories		(1,797	)		153,569
Change in prepaid expenses and other, net		(729	)		6,002
Change in trade accounts payable		23,903			(11,673	)
Payments on floor plan notes payable – trade, net		−			(15,077	)
Change in customer deposits		(31,243	)		(16,701	)
Change in accrued expenses		(25,495	)		(15,257	)
Other, net		(795	)		(747	)
Net cash provided by operating activities		40,141			138,815

Cash flows from investing activities:
Acquisition of property and equipment		(32,933	)		(49,489	)
Proceeds from the sale of property and equipment		136			172
Other		638			1,984
Net cash used in investing activities		(32,159	)		(47,333	)

Cash flows from financing activities:
Draws (payments) on floor plan notes payable – non-trade, net		38,518			(92,579	)
Proceeds from long-term debt		20,125			28,226
Principal payments on long-term debt		(44,669	)		(45,450	)
Principal payments on finance lease obligations		(2,090	)		(2,012	)
Proceeds from issuance of shares relating to employee stock options and employee stock purchases		631			909
Payments of cash dividends		(9,914	)		(4,754	)
Common stock repurchased		(6,561	)		(19,902	)
Net cash used in financing activities		(3,960	)		(135,562	)
Net increase (decrease) in cash and cash equivalents		4,022			(44,080	)
Cash and cash equivalents, beginning of period		312,048			181,620

Cash and cash equivalents, end of period	$	316,070		$	137,540

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	7,262		$	12,556
Income taxes paid (refunded), net	$	27,552		$	(2	)
Noncash investing and financing activities:
Assets acquired under finance leases	$	10,368		$	12,673

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

Table of Contents

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1 – Principles of Consolidation and Basis of Presentation

The interim consolidated financial statements included herein have been prepared by Rush Enterprises, Inc. and its subsidiaries (collectively referred to as the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All adjustments have been made to the accompanying interim consolidated financial statements, which, in the opinion of the Company’s management, are necessary for a fair presentation of its operating results. All adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is recommended that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.

Stock Split

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

COVID-19 Risks and Uncertainties

In March 2020, the World Health Organization made the assessment that COVID-19 could be characterized as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The Company’s nationwide network of commercial vehicle dealerships are classified as “essential businesses” and have remained operational across the Company’s dealership network. The Company is unable to predict the impact that the COVID-19 pandemic will have on its future business and operating results due to numerous uncertainties, including the duration and severity of the outbreak.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). In January 2021, the FASB issued Accounting Standards Update No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarified the scope and application of the original guidance. The guidance in these standards applies to contract accounting, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met, and provides optional expedients and exceptions for a limited time to ease the potential burden in accounting for reference rate reform. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. ASU 2020-04 is effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. LIBOR benchmarking is utilized in the Company’s working capital and floorplan facilities. The Company is in the process of completing its evaluation of the impact that the adoption of the provisions from this standard will have on its Consolidated Financial Statements.

2 – Other Assets

Franchise Rights

The Company’s only significant identifiable intangible assets, other than goodwill, are rights under franchise agreements with manufacturers. The fair value of the franchise right is determined at the acquisition date by discounting the projected cash flows specific to each acquisition. The carrying value of the Company’s manufacturer franchise rights was $7.0 million as of March 31, 2021 and December 31, 2020, 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.

Table of Contents

Due to the fact that manufacturer franchise rights are specific to 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. Management reviews indefinite-lived manufacturer franchise rights for impairment annually during the fourth quarter, or more often if events or circumstances indicate that an impairment may have occurred. The Company is subject to financial statement risk to the extent that manufacturer franchise rights become impaired due to decreases in the fair market value of its individual franchises.

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

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

Equity Method Investment and Call Option

On February 25, 2019, the Company acquired 50% of the equity interest in Rush Truck Centres of Canada Limited (“RTC Canada”), which acquired the operating assets of Tallman Group, the largest International Truck dealer in Canada. The Company was also granted a call option in the purchase agreement that provides the Company with the right to acquire the remaining 50% equity interest in RTC Canada until the close of business on February 25, 2024. The value of the Company’s call option was $3.6 million as of March 31, 2021, and is reported in Other Assets on the Consolidated Balance Sheet.

On April 25, 2019, the Company entered into a Guaranty Agreement (“Guaranty”) with Bank of Montreal (“BMO”), pursuant to which the Company agreed to guaranty up to CAD250 million (the “Guaranty Cap”) of certain credit facilities entered into by and between Tallman Truck Centre Limited (“TTCL”) and BMO. The Company owned a 50% equity interest in TTCL, which was the sole owner of RTC Canada. Later in 2019, RTC Canada and TTCL were amalgamated into RTC Canada. Interest, fees and expenses incurred by BMO to enforce its rights with respect to the guaranteed obligations and its rights against the Company under the Guaranty are not subject to the Guaranty Cap. In exchange for the Guaranty, RTC Canada is receiving a reduced rate of interest on its credit facilities with BMO. The Guaranty was valued at $5.3 million as of March 31, 2021 and $5.2 million as of December 31, 2020, and is included in the investment in RTC Canada. As of March 31, 2021, the Company’s investment in RTC Canada is $33.2 million. The Company’s equity income in RTC Canada is included in Other income on the Consolidated Statements of Income.

ERP Platform

The total capitalized costs of the Company’s SAP enterprise resource planning software platform (the “ERP Platform”) of $6.5 million are recorded on the Consolidated Balance Sheet in Other Assets. Amortization expense relating to the ERP Platform, which is recognized in depreciation and amortization expense in the Consolidated Statements of Income and Comprehensive Income, was $0.5 million for the three months ended March 31, 2021 and $0.5 million for the three months ended March 31, 2020. The Company estimates that amortization expense relating to the ERP Platform will be approximately $1.5 million in 2021 and $1.2 million per year for the next four years.

3 – Commitments and Contingencies

From time to time, the Company is involved in litigation arising out of its operations in the ordinary course of business. The Company maintains liability insurance, including product liability coverage, in amounts deemed adequate by management. To date, aggregate costs to the Company for claims, including product liability actions, have not been material. However, an uninsured or partially insured claim, or claim for which indemnification is not available, could have a material adverse effect on the Company’s financial condition or results of operations. The Company believes that there are no claims or litigation pending, the outcome of which could have a material adverse effect on its financial position or results of operations. However, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations for the fiscal period in which such resolution occurred.

Table of Contents

4 – Earnings Per Share

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

	Three Months Ended March 31,
	2021		2020
Numerator:
Numerator for basic and diluted earnings per share – Net income available to common shareholders	$	45,333	$	23,107
Denominator:
Denominator for basic earnings per share – weighted average shares outstanding		55,567		54,727
Effect of dilutive securities–
Employee and director stock options and restricted share awards		2,167		1,262
Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions		57,734		55,989
Basic earnings per common share	$	0.82	$	0.42
Diluted earnings per common share and common share equivalents	$	0.79	$	0.41

Options to purchase shares of common stock that were outstanding for the three months ended March 31, 2021 and 2020 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):

March 31,

2021

March 31,

2020

Weighted average anti-dilutive options

131

1,792

5 – Stock Options and Restricted Stock Awards

Valuation and Expense Information

The Company accounts for stock-based compensation in accordance with ASC 718-10, Compensation – Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to the Company’s employees and directors, including employee stock options, restricted stock unit awards, restricted stock awards and employee stock purchases related to the Employee Stock Purchase Plan, based on estimated fair values.

Stock-based compensation expense, calculated using the Black-Scholes option-pricing model for employee stock options and included in selling, general and administrative expense, was $11.5 million for the three months ended March 31, 2021, and $8.6 million for the three months ended March 31, 2020.

As of March 31, 2021, the Company had $12.3 million of unrecognized compensation cost related to non-vested employee stock options to be recognized over a weighted-average period of 2.6 years and $14.6 million of unrecognized compensation cost related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.7 years.

6 – 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 March 31, 2021, and December 31, 2020. The carrying value of current assets and current liabilities approximates the fair value due to the short maturity of these items.

The fair value of the Company’s long-term debt is based on secondary market indicators. Because the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rate, 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 carrying amount of such debt approximates fair value.

Table of Contents

7 – Segment Information

The Company currently has one reportable business segment - the Truck Segment. The Truck Segment includes the Company’s operation of a nationwide network of commercial vehicle dealerships that provide an integrated one-stop source for the commercial vehicle needs of its customers, including retail sales of new and used commercial vehicles; aftermarket parts, service and collision center facilities; and financial services, including the financing of new and used commercial vehicle purchases, insurance products and truck leasing and rentals. The commercial vehicle dealerships are deemed a single reporting unit because they have similar economic characteristics. The Company’s chief operating decision maker considers the entire Truck Segment, not individual dealerships or departments within its dealerships, when making decisions about resources to be allocated to the segment and assessing its performance.

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

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

The following table contains summarized information about reportable segment revenues, segment income or loss from continuing operations and segment assets for the periods ended March 31, 2021 and 2020 (in thousands):

	Truck Segment		All Other			Totals

As of and for the three months ended March 31, 2021
Revenues from external customers	$	1,228,111	$	3,695		$	1,231,806
Segment operating income (loss)		55,950		275			56,225
Segment income (loss) before taxes		56,432		205			56,637
Segment assets		2,958,832		49,591			3,008,423

As of and for the three months ended March 31, 2020
Revenues from external customers	$	1,283,379	$	3,284		$	1,286,663
Segment operating income (loss)		35,451		(254	)		35,197
Segment income (loss) before taxes		31,993		(324	)		31,669
Segment assets		3,203,704		38,954			3,242,658

8 – Income Taxes

The Company had unrecognized income tax benefits totaling $3.3 million as a component of accrued liabilities as of March 31, 2021 and December 31, 2020, the total of which, if recognized, would impact the Company’s effective tax rate. An unfavorable settlement may require a charge to income tax expense and a favorable resolution would be recognized as a reduction to income tax expense. The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense. The Company had approximately $150,000 accrued for the payment of interest as of March 31, 2021 and December 31, 2020. No amounts were accrued for penalties.

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

The effective tax rate of 20% for the three months ended March 31, 2021 is lower than the statutory federal rate of 21% primarily due to the tax benefit related to the gain associated with the vesting and exercise of equity awards granted through the Company’s long-term incentive plan.

9 – Revenue

The Company’s revenues are primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue for such sales is recognized when the customer obtains control, which is typically when the finished product is delivered to the customer. The Company’s material revenue streams have been identified as the following: the sale of new and used commercial vehicles, arrangement of associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle parts. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

Table of Contents

The following table summarizes the Company’s disaggregated revenue by revenue source for the three months ended March 31, 2021 and 2020 (in thousands):

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Commercial vehicle sales revenue	$	747,719	$	789,554
Parts revenue		240,436		236,597
Commercial vehicle repair service revenue		175,301		191,381
Finance revenue		3,904		2,355
Insurance revenue		2,561		2,112
Other revenue		3,658		3,883
Total	$	1,173,579	$	1,225,882

All of the Company's performance obligations and associated revenues are generally transferred to customers at a point in time. The Company did not have any material contract assets or contract liabilities on the balance sheet as of March 31, 2021. Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of other revenues are related to the Truck Segment.

10 – Leases

Lease of Vehicles as Lessor

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

The Company’s policy is to depreciate its lease and rental fleet using a straight-line method over each customer’s contractual lease term. The lease unit is depreciated to a residual value that approximates 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 March 31, 2021, in the amount of $5.2 million and as of December 31, 2020, in the amount of $5.6 million is reflected in Other Assets on the Consolidated Balance Sheet.

Rental and lease income during the three months ended March 31, 2021 and March 31, 2020 consisted of the following (in thousands):

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Minimum rental payments	$	50,705	$	53,172
Nonlease payments		7,522		7,609
Total	$	58,227	$	60,781

11 – Accumulated Other Comprehensive Income

The following table shows the components of accumulated other comprehensive income (loss) (in thousands):

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

The equity method investment in RTC Canada was valued using the exchange rate of one US Dollar to 1.2562 Canadian dollars as of March 31, 2021. The adjustment is reflected in Other Assets on the Consolidated Balance Sheet.

Table of Contents

12 – 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 Topic 326, 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, leasing and parts and service receivables and other trade receivables. The Company maintains an allowance for credit losses based on the probability of default, its historical rate of losses, aging and current economic conditions. The Company writes off account balances when it has exhausted reasonable collection efforts and determined that the likelihood of collection is remote. These write-offs are charged against the allowance for credit losses.

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

	Balance December 31, 2020		Provision for the Three Months Ended March 31, 2021		Write offs Against Allowance, net of Recoveries			Balance March 31, 2021

Commercial vehicle receivables	$	172	$	5	$	−		$	177
Manufacturers’ receivables		136		266		(256	)		146
Leasing, parts and service receivables		1,278		181		(377	)		1,082
Other receivables		19		2		(3	)		18
Total	$	1,605	$	454	$	(636	)	$	1,423

Table of Contents

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

Certain statements contained in this Form 10-Q (or otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, website postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”), notwithstanding that such statements are not specifically identified. Forward-looking statements include statements about the Company’s financial position, business strategy and plans and objectives of management of the Company for future operations, as well as statements regarding the effects COVID-19 may have on our business and financial results. These forward-looking statements reflect the best judgments of the Company about the future events and trends based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements reflect our current view of the Company with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Please read Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for a discussion of certain of those risks. Other unknown or unpredictable factors could also have a material adverse effect on future results. Although the Company believes that its expectations are reasonable as of the date of this Form 10-Q, it can give no assurance that such expectations will prove to be correct. The Company does not intend to update or revise any forward-looking statements unless securities laws require it to do so, and the Company undertakes no obligation to publicly release any revisions to forward-looking statements, whether because of new information, future events or otherwise.

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

Note Regarding Trademarks Commonly Used in the Company’s Filings

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

General

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

We are a full-service, integrated retailer of commercial vehicles and related services. The Truck Segment includes our operation of a network of commercial vehicle dealerships under the name “Rush Truck Centers.” Rush Truck Centers primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, IC Bus or Blue Bird. Through our strategically located network of Rush Truck Centers, we provide one-stop service for the needs of our commercial vehicle customers, including retail sales of new and used commercial vehicles, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance products.

Our Rush Truck Centers are principally located in high traffic areas throughout the United States. Since commencing operations as a Peterbilt heavy-duty truck dealer in 1966, we have grown to operate over 100 Rush Truck Centers in 22 states.

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

Table of Contents

Stock Split

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

The COVID-19 Pandemic and Its Impact on Our Business

Our dealership network has remained operational since the beginning of the COVID-19 pandemic. Despite our dealerships remaining open, the COVID-19 pandemic had a significant negative impact on our revenues for 2020. While the COVID-19 pandemic is not over, business conditions have improved significantly. We expect the general economic recovery to continue as more states fully re-open and businesses return to operating at full or close-to-full capacity. Based on current market conditions and the steps we have taken to reduce expenses, we believe the worst of the pandemic’s effect on our business is behind us.

Commercial Vehicle Sales

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

Aftermarket Products and Services

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

Rental and Leasing Operations

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

Liquidity

As of March 31, 2021, our total net liquidity was approximately $421.6 million, including $316.1 million in cash and $105.5 million available under our various credit agreements, excluding our floor plan credit agreements. Our working capital facility (“the Working Capital Facility”) with BMO Harris Bank N.A. (“BMO Harris”) includes up to $100.0 million of revolving credit loans that are available to us for working capital, capital expenditures and other general corporate purposes. We currently have no outstanding draws on this line of credit. For further discussion of our liquidity, see the Liquidity and Capital Resources discussion set forth herein.

Outlook

A.C.T. Research Co., LLC (“A. C.T. Research”), a commercial vehicle industry data and forecasting service provider, currently forecasts new U.S. Class 8 retail truck sales to be 248,400 units in 2021, which would represent a 26.9% increase compared to 2020. We expect our market share of new Class 8 truck sales to range between 5.5% and 6.0% in 2021. This market share percentage would result in the sale of approximately 13,600 to 14,900 of new Class 8 trucks in 2021, based on A.C.T. Research’s current U.S. retail sales estimate of 248,400 units.

With respect to new U.S. Class 4-7 retail commercial vehicle sales, A.C.T. Research currently forecasts sales to be 251,500 units in 2021, which would represent an 8.4% increase compared to 2020. We expect our market share of new Class 4 through 7 commercial vehicle sales to range between 4.3% and 5.0% in 2021. This market share percentage would result in the sale of approximately 10,800 to 12,500 of new Class 4 through 7 commercial vehicles in 2021, based on A.C.T. Research’s current U.S. retail sales estimates of 251,500 units.

Table of Contents

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

Although our Aftermarket Products and Services revenues were down slightly compared to the first quarter of 2020, they improved over the fourth quarter of 2020, and we expect to see gradual improvement as the year progresses. While parts supply chain constraints are expected to impact the industry over the next two quarters, we do not believe these constraints will have a significant overall effect on our Aftermarket Products and Services revenues for 2021. We continue to make progress on our strategic initiatives to increase our Aftermarket Products and Services revenues. We believe our Aftermarket Products and Services revenues will increase 8% to 10% in 2021, compared to 2020.

Critical Accounting Policies and Estimates

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

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined by specific identification of new and used commercial vehicle inventory and by the first-in, first-out method for tires, parts and accessories. As the market value of our inventory typically declines over time, reserves are established based on historical loss experience and market trends. These reserves are charged to cost of sales and reduce the carrying value of our inventory on hand. An allowance is provided when it is anticipated that cost will exceed net realizable value less a reasonable profit margin.

Goodwill

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

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

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we used to test for impairment losses on goodwill. However, if actual results are not consistent with our estimates or assumptions, or certain events occur that might adversely affect the reported value of goodwill in the future, we may be exposed to an impairment charge that could be material.

Goodwill was tested for impairment during the fourth quarter of 2020 and no impairment was required. The fair value of our reporting unit exceeded the carrying value of its net assets. As a result, we were not required to conduct the second step of the impairment test. We do not believe our reporting unit is at risk of failing step one of the impairment test.

Table of Contents

Insurance Accruals

We are partially self-insured for a portion of the claims related to our property and casualty insurance programs, which requires us to make estimates regarding expected losses to be incurred. We engage a third-party administrator to assess any open claims and we adjust our accrual accordingly on a periodic basis. We are also partially self-insured for a portion of the claims related to our workers’ compensation and medical insurance programs. We use actuarial information provided from third-party administrators to calculate an accrual for claims incurred, but not reported, and for the remaining portion of claims that have been reported.

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

Accounting for Income Taxes

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

Our income tax returns are periodically audited by tax authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions. In evaluating the exposures associated with our various tax filing positions, we adjust our liability for unrecognized tax benefits and income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available.

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

Revenue Recognition

Effective January 1, 2018, we adopted ASU 2014-09, “Revenue from Contracts with Customers (“Topic 606”),” using the modified retrospective transition method. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations. We then assess whether each promised good or service is distinct and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Table of Contents

Leases

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

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

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

Allowance for Credit Losses

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

Stock Split

Table of Contents

Results of Operations

The following discussion and analysis includes our historical results of operations for the three months ended March 31, 2021 and 2020.

The following table sets forth certain financial data as a percentage of total revenues:

	Three Months Ended March 31,
	2021			2020

New and used commercial vehicle sales		60.7	%		61.4	%
Parts and service sales		33.8			33.3
Lease and rental		4.7			4.7
Finance and insurance		0.5			0.3
Other		0.3			0.3
Total revenues		100.0			100.0
Cost of products sold		80.1			81.8
Gross profit	19.9				18.2
Selling, general and administrative		14.2			14.4
Depreciation and amortization		1.1			1.1
Gain (loss) on sale of assets		0.0			0.0
Operating income		4.6			2.7
Other income		0.0			0.0
Equity in earnings of unconsolidated entities		0.0			0.1
Interest expense, net		0.0			0.3
Income before income taxes		4.6			2.5
Provision for income taxes		0.9			0.7
Net income		3.7	%		1.8	%

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

	Three Months Ended March 31,
	2021			2020
Gross Profit:
New and used commercial vehicle sales		28.9	%		26.0	%
Parts and service sales		62.9			66.8
Lease and rental		4.1			3.7
Finance and insurance		2.6			1.9
Other		1.5			1.6
Total gross profit		100.0	%		100.0	%

Table of Contents

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

	Three Months Ended March 31,
	2021			2020			% Change
Vehicle unit sales:
New heavy-duty vehicles		2,995			3,078			-2.7	%
New medium-duty vehicles		2,334			3,264			-28.5	%
New light-duty vehicles		395			267			47.9	%
Total new vehicle unit sales		5,724			6,609			-13.4	%

Used vehicles		1,924			1,558			23.5	%

Vehicle revenues:
New heavy-duty vehicles	$	450.0		$	470.8			-4.4	%
New medium-duty vehicles		188.2			244.0			-22.9	%
New light-duty vehicles		18.4			11.5			60.0	%
Total new vehicle revenue	$	656.6		$	726.3			-9.6	%

Used vehicle revenue	$	88.3		$	59.7			47.9	%

Other vehicle revenues:⁽¹⁾	$	2.8		$	3.6			-22.2	%

Dealership absorption ratio:		122.6	%		114.3	%		7.3	%

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

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 122.6% absorption ratio for the first quarter of 2021 and a 114.3% absorption ratio for the first quarter of 2020.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Revenues

Total revenues decreased $54.9 million, or 4.3%, in the first quarter of 2021, compared to the first quarter of 2020.

Our Aftermarket Products and Services revenues decreased $12.2 million, or 2.9%, in the first quarter of 2021, compared to the first quarter of 2020. Although Aftermarket Products and Services revenues were down slightly compared to the first quarter of 2020, they were up 5.3% compared to the fourth quarter of 2020. The increase over the fourth quarter of 2020 is primarily due to the overall economic recovery in the U.S. and continued increase in activity from the industries that we serve.

Revenues from sales of new and used commercial vehicles decreased $41.8 million, or 5.3%, in the first quarter of 2021, compared to the first quarter of 2020.

We sold 2,995 new Class 8 trucks in the first quarter of 2021, a 2.7% decrease compared to 3,078 new Class 8 trucks in the first quarter of 2020. This was primarily due to the timing of certain large fleet deliveries in the first quarter of 2020.

We sold 2,334 new Class 4 through 7 commercial vehicles, including 140 buses, in the first quarter of 2021, a 28.5% decrease compared to 3,264 new medium-duty commercial vehicles, including 216 buses, in the first quarter of 2020. Our first quarter 2021 Class 4 through 7 commercial vehicle sales were down primarily due to decreased activity from our lease and rental and food service customers and production shutdowns from some of the manufacturers we represent related to component supply issues.

Table of Contents

We sold 395 new light-duty vehicles in the first quarter of 2021, a 47.9% increase compared to 267 new light-duty vehicles in the first quarter of 2020.

We sold 1,924 used commercial vehicles in the first quarter of 2021, a 23.5% increase compared to 1,558 used commercial vehicles in the first quarter of 2020. The increase in used truck sales in the first quarter of 2021 was primarily due to increased demand for used trucks in light of the supply constraints on new commercial vehicle production. We believe overall used truck values and demand will remain strong through 2021.

Commercial vehicle lease and rental revenues decreased $2.6 million, or 4.2%, in the first quarter of 2021, compared to the first quarter of 2020. The decrease is primarily due to the reduction in the rental fleet compared to the first quarter of 2020.

Finance and insurance revenues increased $2.0 million, or 44.7%, in the first quarter of 2021, compared to the first quarter of 2020. The increase in finance and insurance revenues was due to sales of finance and insurance products to a higher percentage of new and used commercial vehicle purchasers in the first quarter of 2021. Finance and insurance revenues have limited direct

SEC Form 10-Q filed by Rush Enterprises, Inc.