RUSH ENTERPRISES INC TX

Previous wording

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.

Current wording

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, Dennis Eagle, IC Bus and Blue Bird. Through our strategically located network of Rush Truck Centers, we provide one-stop service for the needs of our commercial vehicle customers, including retail sales of new and used commercial vehicles, aftermarket parts sales, service and repair facilities, financing, leasing and rental, and insurance products.

Previous wording

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 22 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.

Current wording

Our Rush Truck Centers are principally located in high traffic areas throughout the United States and Ontario, Canada. Since commencing operations as a Peterbilt heavy-duty truck dealer in 1966, we have grown to operate over 125 franchised Rush Truck Centers in 23 states. In 2019, we purchased a 50% equity interest in an entity in Canada, Rush Truck Centres of Canada Limited (“RTC Canada”) and on May 2, 2022, we purchased an additional 30% equity interest in RTC Canada that increased our equity interest to 80%. RTC Canada currently owns and operates 15 International dealership locations in Ontario. Prior to acquiring the additional 30%, we accounted for the equity interest in RTC Canada using the equity method of accounting. Now, the operating results of RTC Canada are consolidated in the Consolidated Statements of Operations, the Statements of Comprehensive Income, the Consolidated Balance Sheets and commercial vehicle unit sales data as of May 2, 2022.

Previous wording

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 228,000 units in 2024, which would represent a 16.0% decrease compared to 2023. As anticipated, our Class 8 new truck sales in the first quarter were down significantly from the same time period in 2023, due to the previously anticipated industry downturn in new Class 8 truck sales caused by new truck production having caught up to the pent-up market demand and persistent low freight rates and high interest rates. We expect our new Class 8 truck sales in the second quarter to be better than our results in the first quarter. However, we also expect that new U.S. Class 8 retail truck sales in the second half of 2024 will be less than in the first half of the year. We expect our U.S. market share of new Class 8 truck sales to range between 5.9% and 6.4% 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 550 new Class 8 trucks in Canada in 2024.

Current wording

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 228,700 units in 2024, which would represent a 15.8% decrease compared to 2023. As anticipated, we experienced healthy sales growth in the second quarter, compared to the first quarter, due primarily to the timing of deliveries to certain large customers and continued strong demand from vocational fleets. We expect vocational sales to remain strong in the third quarter. However, we also expect that new U.S. Class 8 retail truck sales in the second half of 2024 will be less than in the first half of the year. We expect our U.S. market share of new Class 8 truck sales to range between 5.7% and 6.1% in 2024. This market share percentage would result in the sale of approximately 13,000 to 14,000 new Class 8 trucks in 2024. Additionally, we expect to sell approximately 450 new Class 8 trucks in Canada in 2024.

Previous wording

With respect to new U.S. Class 4 through 7 retail commercial vehicle sales, A.C.T. Research currently forecasts sales to be 262,000 units in 2024, which would represent a 3.7% increase compared to 2023. As we look forward, new Class 4 through 7 commercial vehicle production is still somewhat constrained, but we believe it will continue to improve, and we expect demand to remain steady as customers replace older equipment with new vehicles. Currently, we believe Class 4 through 7 commercial vehicle sales will improve in the second quarter compared to the first quarter and remain strong for the remainder of the year. We expect our U.S. market share of new Class 4 through 7 commercial vehicle sales to range between 5.2% and 5.5% in 2024. This market share percentage would result in the sale of approximately 13,500 to 14,500 new Class 4 through 7 commercial vehicles in 2024. We expect to sell approximately 500 new Class 5 through 7 commercial vehicles in Canada in 2024.

Current wording

With respect to new U.S. Class 4 through 7 retail commercial vehicle sales, A.C.T. Research currently forecasts sales to be 262,000 units in 2024, which would represent a 3.7% increase compared to 2023. As we look forward, production continues to increase and delivery lead times have improved. However, we continue to monitor delays at body manufacturers that could impact deliveries to customers. Currently, we believe Class 4 through 7 commercial vehicle sales in third quarter will be consistent with our second quarter results. We expect our U.S. market share of new Class 4 through 7 commercial vehicle sales to range between 4.9% and 5.3% in 2024. This market share percentage would result in the sale of approximately 13,000 to 14,000 new Class 4 through 7 commercial vehicles in 2024. Additionally, we expect to sell approximately 500 new Class 5 through 7 commercial vehicles in Canada in 2024.

Previous wording

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, and we expect lease and rental revenue to increase approximately 3% during 2024, compared to 2023.

Current wording

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. In addition, we expect lease and rental revenues to remain flat during 2024.

Previous wording

With respect to our parts, service, and collision center (collectively referred to herein as “Aftermarket Products and Services”) operations, we expect that the sluggish freight market, persistent inflation and high interest rates will continue to negatively impact our over-the-road customers, including both small carriers and larger fleets. In the second quarter of 2024, we expect demand for Aftermarket Parts and Services will remain consistent with the first quarter. We believe that the current freight recession will continue to negatively impact our customers until at least late 2024. Despite the challenging operating environment, we believe that the strategic decisions we made several years ago to diversify our customer base and focus on supporting large national fleets, along with our current efforts to reduce expenses across all areas of the company, will allow us to successfully navigate this difficult market cycle. We also believe that our Aftermarket Products and Services revenues will increase between 1% and 5% in 2024, compared to 2023.

Current wording

With respect to our parts, service, and collision center (collectively referred to herein as “Aftermarket Products and Services”) operations, we expect that the sluggish freight market and persistent high interest rates will continue to negatively impact our over-the-road customers, including both small carriers and larger fleets. Despite the challenging operating environment that is impacting the industry, we believe that the strategic decisions we made several years ago to diversify our customer base and focus on supporting large national fleets, along with the operating expense reduction measures we undertook at the beginning of the second quarter, will allow us to successfully navigate this difficult market cycle. We also believe that our Aftermarket Products and Services revenues will remain flat to slightly down in 2024, compared to 2023.

Previous wording

The following discussion and analysis include our historical results of operations for the three months ended March 31, 2024, and 2023.

Current wording

The following discussion and analysis includes our historical results of operations for the three months and six months periods ended June 30, 2024 and 2023.

Previous wording

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

Current wording

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 (revenues in millions):

Previous wording

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. Our 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 130.1% absorption ratio for the first quarter of 2024, compared to a 136.5% absorption ratio for the first quarter of 2023.

Current wording

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. Our 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 134.0% absorption ratio for the second quarter of 2024 and a 139.7% absorption ratio for the second quarter of 2023.

Previous wording

Our Aftermarket Products and Services revenues totaled $649.2 million in the first quarter of 2024, up 0.1% from the first quarter of 2023. The slight increase in Aftermarket Parts and Services revenues was related to the continued moderating of inflation and challenging economic conditions that are negatively impacting our over-the-road customers.

Current wording

Our Aftermarket Products and Services revenues decreased $23.7 million, or 3.6%, in the second quarter of 2024, compared to the second quarter of 2023. The decrease in Aftermarket Parts and Services revenues was primarily a result of weaker demand caused by the ongoing freight recession and high interest rates impacting our over-the-road customers.

Previous wording

We sold 3,331 new Class 4 through 7 medium-duty commercial vehicles, including 386 buses, in the first quarter of 2024, a 9.6% increase compared to 3,038 new medium-duty commercial vehicles, including 332 buses, in the first quarter of 2023. The increase in our new Class 4 through 7 commercial vehicle sales in the first quarter was primarily related to increased production of medium-duty commercial vehicles by the manufacturers we represent. New U.S. Class 4 through 7 retail commercial vehicle sales totaled 59,786 units in the first quarter of 2024, up 6.5% compared to the first quarter of 2023, according to ACT Research.

Current wording

We sold 3,691 new Class 4 through 7 commercial vehicles, including 343 buses, in the second quarter of 2024, a 6.2% increase compared to 3,477 new medium-duty commercial vehicles, including 462 buses, in the second quarter of 2023. The increase in new Class 4 through 7 commercial vehicle sales was primarily a result of strong demand and increased production of commercial vehicles from the manufacturers we represent.

Previous wording

We sold 456 light-duty vehicles in the first quarter of 2024, a 9.5% decrease compared to 504 light-duty vehicles sold in the first quarter of 2023.

Current wording

We sold 537 light-duty vehicles in the second quarter of 2024, an 18.8% increase compared to 452 light-duty vehicles sold in the second quarter of 2023.

Previous wording

Commercial vehicle lease and rental revenues increased $1.2 million, or 1.4%, in the first quarter of 2024, compared to the first quarter of 2023. The slight increase in commercial vehicle lease and rental revenues was primarily due to the delivery of new leased vehicles, as manufacturers were able to increase production, which was partially offset by a slight decrease in rental utilization.

Current wording

Commercial vehicle lease and rental revenues decreased $0.9 million, or 1.0%, in the second quarter of 2024, compared to the second quarter of 2023. This decrease in commercial vehicle lease and rental revenues was primarily a result of decreased rental vehicle utilization.

Previous wording

Finance and insurance revenues decreased $1.2 million, or 17.9%, in the first quarter of 2024, compared to the first quarter of 2023. This decrease is primarily due to the mix of purchasers of commercial vehicles. During the first quarter of 2024, most of our sales were to larger fleets, which usually arrange their own financing. We are more likely to provide financing to owner-operators and smaller fleets, which comprised a smaller percentage of commercial vehicle sales during the first quarter of 2024. Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share of our operating profits.

Current wording

Finance and insurance revenues decreased $0.3 million, or 4.1%, in the second quarter of 2024, compared to the second quarter of 2023. This decrease is primarily due to the mix of purchasers of commercial vehicles. During the second quarter of 2024, most of our sales were to larger fleets, which usually arrange their own financing. We are more likely to provide financing to owner-operators and smaller fleets, which comprised a smaller percentage of commercial vehicle sales during the second quarter of 2024. Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share of our operating profits.

Previous wording

Gross margins from our Aftermarket Products and Services operations decreased to 36.5% in the first quarter of 2024, from 38.0% in the first quarter of 2023. Gross profit for the Aftermarket Products and Services departments decreased to $236.9 million in the first quarter of 2024, from $246.1 million in the first quarter of 2023. This decrease is primarily related to continued moderating of inflation and softening demand due to difficult economic conditions impacting many of our customers. Historically, gross margins on parts sales range from 28% to 30% and gross margins on service and collision center operations range from 66% to 68%. Gross profits from parts sales represented 57.5% of total gross profit for Aftermarket Products and Services operations in the first quarter of 2024 and 61.4% in the first quarter of 2023. Service and collision center operations represented 42.5% of total gross profit for Aftermarket Products and Services operations in the first quarter of 2024 and 38.6% in the first quarter of 2023. We expect blended gross margins on Aftermarket Products and Services operations to range from 36.0% to 38.0% in 2024.

Current wording

Gross margins from our Aftermarket Products and Services operations decreased to 37.5% in the second quarter of 2024, from 38.1% in the second quarter of 2023. Gross profit from our Aftermarket Products and Services operations decreased to $235.3 million in the second quarter of 2024, from $247.8 million in the second quarter of 2023. This decrease is primarily related to decreased demand resulting from the current freight recession and high interest rates. Historically, gross margins on parts sales range from 28% to 30% and gross margins on service and collision center operations range from 66% to 68%. Gross profits from parts sales represented 58.4% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2024 and 60.5% in the second quarter of 2023. Service and collision center operations represented 38.8% of total gross profit from Aftermarket Products and Services operations in the second quarter of 2024 and 39.5% in the second quarter of 2023. We expect blended gross margins on Aftermarket Products and Services operations to range from 36.0% to 38.0% in 2024.

Previous wording

Gross margins on new Class 8 truck sales decreased to 9.7% in the first quarter of 2024, from 9.8% in the first quarter of 2023. In 2024, we expect overall gross margins from new heavy-duty truck sales of approximately 8.5% to 9.5%.

Current wording

Gross margins on new Class 8 truck sales decreased to 8.6% in the second quarter of 2024, from 10.3% in the second quarter of 2023. This decrease was primarily due to weak demand and elevated new truck inventory valuation reserves. In 2024, we expect overall gross margins from new heavy-duty truck sales of approximately 8.5% to 9.5%.

Previous wording

Gross margins on used commercial vehicle sales increased to 21.6% in the first quarter of 2024, from 9.0% in the first quarter of 2023. This increase was primarily due to successful execution on our used truck inventory and sales strategy. We expect margins on used commercial vehicles to range between 15.0% and 20.0% in 2024.

Current wording

Gross margins on used commercial vehicle sales increased to 19.2% in the second quarter of 2024, from 11.8% in the second quarter of 2023. This increase was primarily due to the successful execution of our used truck inventory and sales strategy. We expect margins on used commercial vehicles to range between 15.0% and 20.0% in 2024.

Previous wording

Gross margins from truck lease and rental sales decreased to 27.5% in the first quarter of 2024, from 30.2% in the first quarter of 2023. This decrease is primarily related to a decrease in rental utilization rates, which have returned to historical levels as new commercial vehicle production has normalized and rental customers have purchased or leased new commercial vehicles. We expect gross margins from lease and rental sales of approximately 28.0% to 30.0% 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.

Current wording

Gross Margins from truck lease and rental sales decreased to 28.5% in the second quarter of 2024 from 30.5% in the second quarter of 2023. This decrease was primarily related to lower rental utilization. We expect gross margins from lease and rental sales of approximately 28.0% to 30.0% 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.

Previous wording

Selling, General and Administrative (“SG&A”) expenses increased $6.9 million, or 2.7%, in the first quarter of 2024, compared to the first quarter of 2023. This increase primarily resulted from increased personnel expense and other increased costs due to inflation, compared to the first quarter of 2023. SG&A expenses as a percentage of total revenues increased to 14.1% in the first quarter of 2024, from 13.4% in the first quarter of 2023. 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.

Current wording

Selling, General and Administrative (“SG&A”) expenses decreased $5.3 million, or 2.1%, in the second quarter of 2024, compared to the second quarter of 2023. This decrease primarily resulted from reductions to our operating expenses. SG&A expenses as a percentage of total revenues decreased to 12.4% in the second quarter of 2024, from 12.8% in the second quarter of 2023. 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 12.0% 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.

Previous wording

Net interest expense increased $7.0 million, or 63.6%, in the first quarter of 2024, compared to the first quarter of 2023. 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 the first quarter of 2023. We expect net interest expense in 2024 to increase compared to 2023, primarily due to increased borrowings under our credit facilities and the interest related thereto, 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. We expect that the amount of borrowings on our credit facilities will decline during the remainder of 2024 and that the net interest expense associated therewith will subside.

Current wording

Net interest expense increased $7.2 million, or 59.1%, in the second quarter of 2024, compared to the second quarter of 2023. This increase in interest expense is a result of an increase in our vehicle inventory levels and elevated interest rates on our variable rate debt compared to the second quarter of 2023. We expect net interest expense in 2024, compared to 2023, to increase due to increased borrowings and 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.

Previous wording

As a result of the factors described above, income before income taxes decreased $26.3 million, or 22.1%, in the first quarter of 2024, compared to the first quarter of 2023.

Current wording

As a result of the factors described above, income before income taxes decreased $25.5 million, or 19.5%, in the second quarter of 2024, compared to the second quarter of 2023.

Previous wording

Income taxes decreased $7.0 million, or 24.8%, in the first quarter of 2024, compared to the first quarter of 2023. We provided for taxes at a 23.0% effective rate in the first quarter of 2024 and 23.8% in the first quarter of 2023. We expect our effective tax rate to be approximately 24.0% to 25.0% of pretax income in 2024.

Current wording

Income taxes decreased $5.7 million, or 17.9%, in the second quarter of 2024, compared to the second quarter of 2023. We provided for taxes at a 24.5% effective rate in the second quarter of 2024 and 24.5% in the second quarter of 2023. We expect our effective tax rate to be approximately 24.0% to 25.0% of pretax income in 2024.

Previous wording

Gross profit decreased $8.9 million, or 2.2%, in the first quarter of 2024, compared to the first quarter of 2023. Gross profit as a percentage of sales decreased to 20.8% in the first quarter of 2024, from 20.9% in the first quarter of 2023.

Current wording

Gross profit decreased $30.4 million, or 3.7%, in the first six months of 2024, compared to the first six months of 2023. Gross profit as a percentage of sales was 20.1% in the first six months of 2024 and 20.8% in the first six months of 2023.

Previous wording

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 March 31, 2024, we had working capital of approximately $758.8 million, including $155.9 million in cash, available to fund our operations. We believe that these funds, together with expected cash flows from operations, are sufficient to meet our operating requirements for at least the next twelve months. From time to time, we utilize our excess cash on hand to pay down our outstanding borrowings under various credit agreements. The resulting interest earned on the floor plan credit agreement with BMO Harris Bank N.A. (“BMO Harris”) (the “Floor Plan Credit Agreement”) is recognized as an offset to our interest expense.

Current wording

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 June 30, 2024, we had working capital of approximately $673.0 million, including $167.3 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 various credit agreements. The resulting interest earned on the floor plan credit agreement with BMO Harris Bank N.A. (“BMO Harris”) (the “Floor Plan Credit Agreement”) is recognized as an offset to our interest expense.

Previous wording

We continually evaluate our liquidity and capital resources based upon: (i) our cash, cash equivalents and restricted cash 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.

Current wording

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.

Previous wording

We have a secured line of credit that provides for a maximum borrowing of $20.0 million. There were no advances outstanding under this secured line of credit on March 31, 2024, however, $18.9 million was pledged to secure various letters of credit related to self-insurance products, leaving $1.1 million available for future borrowings as of March 31, 2024.

Current wording

We have a secured line of credit that provides for a maximum borrowing of $25.0 million. There were no advances outstanding under this secured line of credit on June 30, 2024, however, $18.9 million was pledged to secure various letters of credit related to self-insurance products, leaving $6.1 million available for future borrowings as of June 30, 2024.

Previous wording

Our floor plan financing agreements and the credit agreement with Wells Fargo Bank, National Association 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 March 31, 2024, 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 these covenants in the foreseeable future.

Current wording

Our long-term debt, floor plan financing agreements and our credit agreement with Wells Fargo Bank, National Association 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 June 30, 2024, 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 these covenants in the foreseeable future.

Previous wording

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.

Current wording

We expect to purchase or lease commercial vehicles worth approximately $170.0 million to $180.0 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.

Previous wording

During the first quarter of 2024, we paid a cash dividend of $13.9 million. Additionally, on April 23, 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 June 10, 2024, to all shareholders of record as of May 9, 2024. The total dividend disbursement is estimated at approximately $13.4 million. We expect to continue paying cash dividends on a quarterly basis. However, there is no assurance as to future dividends because the declaration and payment of such dividends is subject to the business judgment of our Board of Directors and will depend on historic and projected earnings, capital requirements, covenant compliance and financial conditions and such other factors as our Board of Directors deem relevant.

Current wording

During the second quarter of 2024, we paid a cash dividend of $13.5 million. Additionally, on July 31, 2024, our Board of Directors declared a cash dividend of $0.18 per share of Class A and Class B common stock, to be paid on September 10, 2024, to all shareholders of record as of August 13, 2024, which represents a 5.6% increase compared to the cash dividend we paid in the first quarter of 2024. 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.

Previous wording

On December 6, 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 of shares 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. As of March 31, 2024, we had repurchased $73.2 million of our shares of common stock under the current stock repurchase program, excluding federal excise tax. The current stock repurchase program expires on December 31, 2024, and may be suspended or discontinued at any time.

Current wording

On December 6, 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 June 30, 2024, we had repurchased $77.2 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.

Previous wording

We anticipate funding the capital expenditures for the improvement and expansion of existing facilities and recurring expenses through our operating cash flows. We can fund the construction or purchase of new facilities through our operating cash flows or by financing.

Current wording

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.

Previous wording

Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. During the first quarter of 2024, operating activities resulted in net cash used in by operations of $155.1 million. Net cash provided by operating activities primarily consisted of $71.5 million in net income, as well as non-cash adjustments related to depreciation and amortization of $56.8 million, and stock-based compensation of $14.1 million. Cash used by operating activities included an aggregate of $297.4 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of $17.4 million from the increase in accounts payable, which was offset primarily by cash outflows of $215.5 million from the increase in inventories, $49.9 million from the increase in accounts receivable, $17.7 million from the decrease in customer deposits and $26.9 million from the increase in accrued expenses. Most of our commercial vehicle inventory is financed through our floor plan credit agreements.

Current wording

Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. During the first six months of 2024, operating activities resulted in net cash provided by operations of $115.5 million. Net cash provided by operating activities primarily consisted of $150.3 million in net income, as well as non-cash adjustments related to depreciation and amortization of $114.3 million, stock-based compensation of $19.6 million and cash inflows for deferred income tax expense of $1.5 million. Cash provided by operating activities included an aggregate of $169.7 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of $3.9 million from the increase in accounts payable, which were offset by cash outflows of $34.0 million from the increase in accounts receivable, $63.4 million from the increase in inventories, $7.6 million from the increase in other assets, $49.2 million from the decrease in customer deposits and $19.4 million from the increase in accrued expenses. Most of our commercial vehicle inventory is financed through our floor plan credit agreements.

Previous wording

Cash flows from financing activities include borrowings and repayments of long-term debt and net proceeds of floor plan notes payable, non-trade. During the first quarter of 2024, financing** **activities resulted in net cash provided by financing activities of $196.5 million, primarily related to $110.2 million from net draws on floor plan notes payable, non-trade, $698.8 million from borrowings of long-term debt and $9.4 million from the issuance of shares related to equity compensation plans. These cash inflows were offset by cash outflows of $592.9 million used for principal repayments of long-term debt and finance lease obligations, $5.6 million used for repurchases of common stock, $9.5 million for taxes paid related to net share settlement of equity awards and $13.9 million used for payment of cash dividends.

Current wording

Cash flows from financing activities include borrowings and repayments of long-term debt and net proceeds of floor plan notes payable, non-trade.** During the first six months of 2024, financing **activities resulted in net cash provided by financing activities of $29.2 million, primarily related to cash inflows of $11.5 million from the issuance of shares related to equity compensation plans, $88.4 million from net draws on floor plan notes payable, non-trade and borrowings of $1.2 billion of long-term debt. These cash inflows were offset by $1.2 billion used for principal repayments of long-term debt and capital lease obligations, $9.5 million for taxes related to net share settlement of equity awards, $9.5 million used for repurchases of common stock and $27.2 million used for payment of cash dividends. The borrowings of long-term debt were primarily related to purchasing units for the rental and leasing operations.

Previous wording

During the first quarter of 2023, financing activities provided $28.3 million in net cash flow. Cash outflows were primarily related to $275.3 million used for principal repayments of long-term debt and finance lease obligations, $24.0 million used for the repurchase of our common stock and $12.1 million used for the payment of cash dividends. These cash outflows were offset by cash inflows related to borrowings of $257.7 million of long-term debt and $82.6 million used for net draws on floor plan (non-trade).

Current wording

During the first six months of 2023, financing** **activities resulted in net cash provided by financing activities of $65.7 million, primarily related to cash inflows of $9.7 million from the issuance of shares related to equity compensation plans, $191.0 million from net draws on floor plan notes payable, non-trade and borrowings of $653.4 million of long-term debt. These cash inflows were offset by $694.1 million used for principal repayments of long-term debt and capital lease obligations, $7.0 million for taxes related to net share settlement of equity awards, $63.9 million used for repurchases of common stock and $23.4 million used for payment of cash dividends. The borrowings of long-term debt were primarily related to purchasing units for the rental and leasing operations.

Previous wording

On September 14, 2021, we entered into the 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 March 31, 2024, we had approximately $174.7 million outstanding under the WF Credit Agreement.

Current wording

On September 14, 2021, we entered into the 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 Simple, secured overnight financing rate (“SOFR”) plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio or (B) on or after the SOFR transition date, the 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 June 30, 2024, we had approximately $164.6 million outstanding under the WF Credit Agreement.

Previous wording

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. On April 9, 2024, the PLC agreement was amended to increase the total loan commitment to $375.0 million. 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 March 31, 2024, we had approximately $300.0 million outstanding under the PLC Agreement.

Current wording

On November 1, 2023, we entered into certain Second Amended and Restated Inventory Financing and Purchase Money Security Agreement with PACCAR Leasing Company, (“PLC”), a division of PACCAR Financial Corp., as amended on April 9, 2024 (the “PLC Agreement”). Pursuant to the terms of the PLC Agreement, PLC agreed to make up to $375.0 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 June 30, 2024, we had approximately $133.2 million outstanding under the PLC Agreement.

Previous wording

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 the 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 March 31, 2024, we had approximately $1.0 billion outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan Credit Agreement were $958.3 million during the first three months ended March 31, 2024. 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.

Current wording

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 then 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 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 SOFR. Effective June 1, 2023, borrowings under the Floor Plan Credit Agreement now bear interest per annum, payable monthly, at (A) the greater of (i) zero and (ii) 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 June 30, 2024, we had approximately $1.0 billion outstanding under the Floor Plan Credit Agreement. The average daily outstanding borrowings under the Floor Plan Credit Agreement were $972.8 million during the six months ended June 30, 2024. 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.

Previous wording

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 March 31, 2024, we had approximately $67.4 million CAD outstanding under the RTC Canada Revolving Credit Agreement.

Current wording

On May 31, 2022, RTC Canada entered into that certain BMO Revolving Lease and Rental Credit Agreement (the “RTC Canada Revolving Credit Agreement”) with Bank of Montreal (“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. Prior to June 1, 2024, advances under the RTC Canada Revolving Credit Agreement bore interest per annum, payable on the first business day of each calendar month, at the Canadian Offered Dollar Rate (“CDOR”), plus 1.35%. On June 1, 2024, RTC Canada entered into the First Amendment to the RTC Revolving Credit Agreement that changed the benchmark interest rate to the Canadian Overnight Repo Rate (“CORRA”). Effective June 1, 2024, borrowing under the RTC Revolving Credit Agreement now bear interest per annum payable monthly at CORRA, plus 1.72%. The RTC Canada Revolving Credit Agreement expires September 14, 2026. On June 30, 2024, we had approximately $57.4 million CAD outstanding under the RTC Canada Revolving Credit Agreement.

Previous wording

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 March 31, 2024, we had approximately $72.5 million CAD outstanding under the RTC Canada Floor Plan Agreement.

Current wording

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 BMO. Pursuant to the terms of the Agreement as amended, 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, 2024, borrowings with respect to advances required to be made in CAD dollars bore interest per annum, payable monthly, at CDOR, plus 0.90%. On June 1, 2024, we entered into the Second Amendment to the RTC Canada Floor Plan Agreement that changed the benchmark interest rate with respect to advances required to be made in CAD dollars to CORRA. Effective June 1, 2024, advances required to be made in CAD dollars under the RTC Canada Floor Plan Agreement now bear interest per annum, payable monthly, at CORRA, plus 1.27%. In addition, prior to June 1, 2023, advances required to be made in USD dollars bore interest, payable monthly, 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 benchmark interest rate in the case of an advances required to be made in USD dollars to SOFR. 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 SOFR, plus 1.20%. The RTC Canada Floor Plan Agreement expires September 14, 2026. On June 30, 2024, we had approximately $72.3 million CAD outstanding under the RTC Canada Floor Plan Agreement. The average daily outstanding borrowings under the RTC Canada Floor Plan Credit Agreement were $62.2 million during the six months ended June 30, 2024.

Previous wording

On March 31, 2024, our backlog of commercial vehicle orders was approximately $2,047.1 million, compared to a backlog of commercial vehicle orders of approximately $4,209.9 million on March 31, 2023. The decrease in our backlog primarily reflects the decreased demand for new Class 8 trucks resulting from production catching up to pent-up demand caused by limited production over the last few years. Our backlog is determined quarterly by multiplying the number of new commercial vehicles for each type of commercial vehicle ordered by a customer at our Rush Truck Centers by the recent average selling price for that type of commercial vehicle. We include only confirmed orders in our backlog. However, such orders are subject to cancellation. In the event of order cancellation, we have no contractual right to the total revenues reflected in our backlog. The delivery time for a custom-ordered commercial vehicle varies depending on the truck specifications and demand for the model ordered. We sell most 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 several of our major fleet customers are included in our backlog as of March 31, 2024, and we expect to fill most of our backlog orders during 2024, assuming that the manufacturers we represent can meet their current production schedule.

Current wording

On June 30, 2024, our backlog of commercial vehicle orders was approximately $1,812.1 million, as compared to a backlog of commercial vehicle orders of approximately $4,041.6 million on June 30, 2023. The decrease in our backlog primarily reflects the decreased demand for new Class 8 trucks resulting from production catching up to pent-up demand, low freight rates and high interest rates. Our backlog is determined quarterly by multiplying the number of new commercial vehicles for each particular type of commercial vehicle ordered by a customer at our Rush Truck Centers by the recent average selling price for that type of commercial vehicle. We include only confirmed orders in our backlog. However, such orders are subject to cancellation. In the event of order cancellation, we have no contractual right to the total revenues reflected in our backlog. The delivery time for a custom-ordered commercial vehicle varies depending on the truck specifications and demand for the model ordered. We sell the majority of our new heavy-duty commercial vehicles by customer special order and we sell the majority of our medium- and light-duty commercial vehicles out of inventory. Orders from several of our major fleet customers are included in our backlog as of June 30, 2024, and we expect to fill most of our backlog orders during 2024. Given the difficult industry environment caused by freight rates and high interest rates, which are negatively impacting industry demand for new commercial vehicles, 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.