RUSH ENTERPRISES INC \TX\

Previous wording

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

Current wording

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

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 23 states. We own an 80% equity interest in Rush Truck Centres of Canada Limited (“RTC Canada”). RTC Canada currently owns and operates 12 International dealerships and 2 IC Bus dealerships in Ontario. RTC Canada also sells IC Buses in the provinces of Quebec, New Brunswick, Nova Scotia and Prince Edward Island. 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.

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 160 franchised locations in 24 states. We own an 80% equity interest in Rush Truck Centres of Canada Limited (“RTC Canada”). RTC Canada currently owns and operates 17 International dealerships and 2 IC Bus dealerships in Ontario. RTC Canada also sells IC Buses in Quebec and the provinces of New Brunswick, Nova Scotia and Prince Edward Island. 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.

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 224,800 units in 2026, which would represent a 5.7% increase compared to 2025. While uncertainty related to economic conditions and global events, along with significantly increased fuel prices, continues to weigh on the market, we expect demand for new Class 8 truck to increase as the year progresses. We expect our U.S. market share of new Class 8 truck sales to range between 5.3% and 6.0% in 2026 based on A.C.T. Research’s current forecast. This market share percentage would result in the sale of approximately 12,000 to 13,500 new Class 8 trucks in 2026. We expect to sell approximately 500 new Class 8 trucks in Canada in 2026.

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 228,800 units in 2026, which would represent a 7.6% increase compared to 212,700 units in 2025. We believe that as freight markets continue to improve and our over-the-road customers maintain confidence in their business, demand for new Class 8 trucks will be stronger in the second half of the year. We expect our U.S. market share of new Class 8 truck sales to range between 6.1% and 6.5% in 2026 based on A.C.T. Research’s current forecast. This market share percentage would result in the sale of approximately 14,000 to 15,000 new Class 8 trucks in 2026. We expect to sell approximately 500 new Class 8 trucks in Canada in 2026.

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 218,225 units in 2026, which would represent a 0.4% increase compared to 2025. We believe that most medium-duty customers will remain cautious in 2026 and will look to replace vehicles rather than expand their fleets. We expect our U.S. market share of new Class 4 through 7 commercial vehicle sales to range between 4.8% and 5.3% in 2026 based on A.C.T. Research’s current forecast. This market share percentage would result in the sale of approximately 10,500 to 11,500 new Class 4 through 7 commercial vehicles in 2026. We expect to sell approximately 440 new Class 5 through 7 commercial vehicles in Canada in 2026.

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 207,575 units in 2026, which would represent a 4.5% decrease compared to 217,412 units in 2025. We believe that most medium-duty customers will remain cautious in 2026 and will look to replace vehicles rather than expand their fleets, although we do expect demand for new Class 4 through 7 commercial vehicles to improve throughout the remainder of the year. We expect our U.S. market share of new Class 4 through 7 commercial vehicle sales to range between 5.3% and 5.8% in 2026 based on A.C.T. Research’s current forecast. This market share percentage would result in the sale of approximately 11,000 to 12,000 new Class 4 through 7 commercial vehicles in 2026. We expect to sell approximately 850 new Class 5 through 7 commercial vehicles in Canada in 2026.

Previous wording

We expect to sell approximately 2,900 light-duty vehicles and approximately 7,250 used commercial vehicles in 2026, and we expect lease and rental revenue to increase approximately 2.5% during 2026, compared to 2025.

Current wording

We expect to sell approximately 3,200 light-duty vehicles and approximately 7,500 used commercial vehicles in 2026, and we expect lease and rental revenue to increase approximately 2.5% during 2026, compared to 2025.

Previous wording

The preparation of our interim unaudited consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities in our interim unaudited consolidated financial statements and accompanying notes. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates, judgments and assumptions on an ongoing basis, and while we believe that our estimates, judgments and assumptions are reasonable, they are based upon information available at the time. Actual results might differ from these estimates under different assumptions or conditions.

Current wording

The preparation of our interim unaudited consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities in our interim unaudited consolidated financial statements and accompanying notes. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates, judgments, and assumptions on an ongoing basis, and while we believe that our estimates, judgments and assumptions are reasonable, they are based upon information available at the time. Actual results might differ from these estimates under different assumptions or conditions.

Previous wording

Our significant accounting policies are discussed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2025. There were no material changes to our significant accounting policies.

Current wording

Our significant accounting policies are discussed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Critical Accounting Policies and Estimates" in our Form 10-K. There were no material changes to our significant accounting policies.

Previous wording

The following discussion and analysis include our historical results of operations for the three months ended March 31, 2026, and 2025.

Current wording

The following discussion and analysis includes our historical results of operations for the three months and six months periods ended June 30, 2026 and 2025.

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 126.9% absorption ratio for the first quarter of 2026, compared to a 128.6% absorption ratio for the first quarter of 2025.

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 130.8% absorption ratio for the second quarter of 2026 compared to a 135.5% absorption ratio for the second quarter of 2025.

Previous wording

Our Aftermarket Products and Services revenues totaled $627.2 million in the first quarter of 2026, up 1.3% from the first quarter of 2025. The increase in Aftermarket Parts and Services revenues was primarily related to the successful execution of certain strategic initiatives and increased parts pricing.

Current wording

Our Aftermarket Products and Services revenues increased $9.4 million, or 1.5%, in the second quarter of 2026, compared to the second quarter of 2025. The increase in Aftermarket Parts and Service revenues was primarily related to the successful execution of certain strategic initiatives and improving customer demand.

Previous wording

Revenues from sales of new and used commercial vehicles decreased $175.6 million, or 15.5%, in the first quarter of 2026, compared to the first quarter of 2025. The decrease in new and used commercial vehicle revenues was primarily the result of continued weak demand from over-the-road and medium-duty customers.

Current wording

Revenues from sales of new and used commercial vehicles decreased $42.5 million, or 3.6%, in the second quarter of 2026, compared to the second quarter of 2025. The decrease in new and used commercial vehicle revenue was primarily the result of the timing of deliveries and orders from certain of our larger medium-duty fleet customers.

Previous wording

We sold 516 light-duty vehicles in the first quarter of 2026, a 9.8% increase compared to 470 light-duty vehicles sold in the first quarter of 2025. We sold 1,865 used commercial vehicles in the first quarter of 2026, a 5.4% increase compared to 1,769 used commercial vehicles in the first quarter of 2025.

Current wording

We sold 907 light-duty vehicles in the second quarter of 2026, a 29.0% increase compared to 703 light-duty vehicles sold in the second quarter of 2025. We sold 1,788 used commercial vehicles in the second quarter of 2026, a 4.3% increase compared to 1,715 used commercial vehicles sold in the second quarter of 2025.

Previous wording

Finance and insurance revenues increased $0.4 million, or 7.7%, in the first quarter of 2026, compared to the first quarter of 2025. This increase is primarily due to the mix of purchasers of commercial vehicles. In general, larger fleet customers usually arrange their own financing. We are more likely to provide financing to owner-operators and smaller fleet customers. Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share of our operating profits.

Current wording

Finance and insurance revenues increased $0.8 million, or 14.6%, in the second quarter of 2026, compared to the second quarter of 2025. 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 increased to 36.3% in the first quarter of 2026, from 35.8% in the first quarter of 2025. Gross profit for the Aftermarket Products and Services departments increased to $227.4 million in the first quarter of 2026, from $221.3 million in the first quarter of 2025. This increase is primarily related to rebates received from certain parts manufacturers. 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 57.3% of total gross profit for Aftermarket Products and Services operations in the first quarter of 2026 and 58.3% in the first quarter of 2025. Service and collision center operations represented 42.7% of total gross profit for Aftermarket Products and Services operations in the first quarter of 2026 and 41.7% in the first quarter of 2025. We expect blended gross margins on Aftermarket Products and Services operations to range from 35.5% to 37.5% in 2026.

Current wording

Gross margins from our Aftermarket Products and Services operations decreased to 35.9% in the second quarter of 2026, from 37.6% in the second quarter of 2025. The decrease was primarily a result of an increase in the percentage of sales to national account customers and a competitive pricing environment due to challenging industry conditions. Gross profit from our Aftermarket Products and Services operations decreased to $231.5 million in the second quarter of 2026, from $239.2 million in the second quarter of 2025. 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%. We expect blended gross margins on Aftermarket Products and Services operations to range from 35.5% to 37.5% in 2026.

Previous wording

Gross margins on new Class 8 truck sales decreased to 7.8% in the first quarter of 2026, from 9.0% in the first quarter of 2025. This decrease was primarily due to weak demand and a competitive pricing environment due to challenging industry conditions. In 2026, we expect overall gross margins from new heavy-duty truck sales of approximately 8.0% to 9.0%.

Current wording

Gross margins on new Class 8 commercial vehicle sales decreased to 7.8% in the second quarter of 2026, from 8.5% in the second quarter of 2025. In 2026, we expect overall gross margins from new heavy-duty truck sales of approximately 8.0% to 9.0%.

Previous wording

Gross margins on new Class 4 through 7 commercial vehicle sales increased to 8.8% in the first quarter of 2026, from 7.9% in the first quarter of 2025. This increase was primarily due to the mix of purchasers during the first quarter of 2026. For 2026, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately 7.5% to 9.0%, but this will largely depend upon the mix of purchasers and types of vehicles sold.

Current wording

Gross margins on new Class 4 through 7 commercial vehicle sales decreased to 7.2% in the second quarter of 2026, from 7.5% in the second quarter of 2025. For 2026, we expect overall gross margins from new medium-duty commercial vehicle sales of approximately 7.5% to 9.0%, but this will largely depend upon the mix of purchasers and types of vehicles sold.

Previous wording

Gross margins on used commercial vehicle sales decreased to 12.1% in the first quarter of 2026, from 14.4% in the first quarter of 2025. This decrease was primarily due to a change in sales mix between wholesale and retail. We expect margins on used commercial vehicles to range between 12.0% and 17.0% in 2026.

Current wording

Gross margins on used commercial vehicle sales decreased to 13.7% in the second quarter of 2026, from 16.9% in the second quarter of 2025. This decrease was primarily due to a change in sales mix between wholesale and retail. We expect margins on used commercial vehicles to range between 12.0% and 15.0% in 2026.

Previous wording

Gross margins from truck lease and rental sales decreased to 27.7% in the first quarter of 2026, from 28.2% in the first quarter of 2025. We expect gross margins from lease and rental sales of approximately 27.0% to 29.0% during 2026.

Current wording

Gross margins from truck lease and rental sales decreased to 28.5% in the second quarter of 2026, from 28.7% in the second quarter of 2025. We expect gross margins from lease and rental sales of approximately 27.0% to 29.0% during 2026.

Previous wording

Selling, General and Administrative (“SG&A”) expenses decreased $6.2 million, or 2.5%, in the first quarter of 2026, compared to the first quarter of 2025. This decrease was primarily a result of our ongoing efforts to control our operating expenses. SG&A expenses as a percentage of total revenues increased to 14.4% in the first quarter of 2026, from 13.4% in the first quarter of 2025. 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 2026, we expect SG&A expenses as a percentage of total revenues to range from 13.0% to 14.0%. For 2026, 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 $6.5 million, or 2.6%, in the second quarter of 2026, compared to the second quarter of 2025. SG&A expenses as a percentage of total revenues decreased to 12.9% in the second quarter of 2026, from 13.1% in the second quarter of 2025. The decrease was primarily the result of our ongoing efforts to control operating expenses. Annual SG&A expenses as a percentage of total revenues have ranged from approximately 12.4% to 14.4% over the last five years. For 2026, we expect SG&A expenses as a percentage of total revenues to range from 13.0% to 14.0%. For 2026, 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 decreased $6.5 million, or 50.6%, in the first quarter of 2026, compared to the first quarter of 2025. This decrease in interest expense is primarily the result of decreased interest rates and borrowings. We expect net interest expense in 2026 to decrease compared to 2025, but the amount of the decrease will depend on inventory levels, interest rate fluctuations and the amount of cash available to make prepayments on our floor plan arrangements.

Current wording

Net interest expense decreased $8.3 million, or 65.6%, in the second quarter of 2026, compared to the second quarter of 2025. We expect net interest expense in 2026 to decrease compared to 2025, but the amount of the change 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 $3.2 million, or 4.0%, in the first quarter of 2026, compared to the first quarter of 2025.

Current wording

As a result of the factors described above, income before income taxes decreased $4.8 million, or 5.0%, in the second quarter of 2026, compared to the second quarter of 2025.

Previous wording

Gross profit decreased $14.0 million, or 10.2%, in the first quarter of 2026, compared to the first quarter of 2025. This decrease is primarily related to decreased demand for new commercial vehicles due to challenging industry conditions. Gross profit as a percentage of sales increased to 20.4% in the first quarter of 2026, from 19.3% in the first quarter of 2025.

Current wording

Gross profit decreased $32.0 million, or 4.3%, in the first six months of 2026, compared to the first six months of 2025. Gross profit as a percentage of sales was 19.7% in the first six months of 2026 and 19.5% in the first six months of 2025.

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, 2026, we had working capital of approximately $672.4 million, including $239.7 million in cash, available to fund our operations. We believe that these funds, together with expected cash flows from operations, are sufficient to meet our operating requirements for at least the next twelve months. From time to time, we utilize our excess cash on hand to pay down our outstanding borrowings under various credit agreements.

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 financing. As of June 30, 2026, we had working capital of approximately $710.7 million, including $264.9 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.

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 agreements; 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 agreements; 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 $25.0 million. There were no advances outstanding under this secured line of credit on March 31, 2026, however, $18.7 million was pledged to secure various letters of credit related to self-insurance products, leaving $6.3 million available for future borrowings as of March 31, 2026.

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, 2026, however, $18.6 million was pledged to secure various letters of credit related to self-insurance products, leaving $6.4 million available for our future borrowings as of June 30, 2026.

Previous wording

We expect to purchase or lease commercial vehicles worth approximately $225.0 million to $275.0 million for our leasing operations during 2026, 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 2026.

Current wording

We expect to purchase or lease commercial vehicles worth approximately $275.0 million to $325.0 million for our leasing operations during 2026, 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 2026.

Previous wording

During the first quarter of 2026, we paid a cash dividend of $14.7 million. Additionally, on April 27, 2026, our Board of Directors declared a cash dividend of $0.19 per share of Class A and Class B common stock, to be paid on June 10, 2026, to all shareholders of record as of May 12, 2026. The total dividend disbursement is estimated at approximately $14.7 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 2026, we paid a cash dividend of $14.8 million. On July 28, 2026, the Company’s Board of Directors declared a three-for-two stock split with respect to both the Company’s Class A and Class B common stock. The stock split will be effected in the form of a stock dividend payable on August 31, 2026, to shareholders of record as of August 11, 2026. Holders of the Company’s common stock will receive an additional one-half share for each share of common stock held as of the record date. Additionally, on July 28, 2026, our Board of Directors declared a cash dividend of $0.14 per share of Class A and Class B common stock, to be paid on September 24, 2026, to all shareholders of record as of September 9, 2026, which on a post-stock split basis represents a 10.5% increase compared to the cash dividend we paid in the first quarter of 2026. The total dividend disbursement is estimated at approximately $16.3 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.

Previous wording

On December 3, 2025, 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, 2025. Repurchases, if any, are 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. The current stock repurchase program expires on December 31, 2026, and may be suspended or discontinued at any time.

Current wording

On December 3, 2025, 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, 2025. Repurchases, if any, are made at times and in amounts 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 June 30, 2026, we had repurchased $5.5 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, 2026, 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

We are currently under contract to construct a new facility in Conroe, Texas with a current budget of $20.0 million. We signed a purchase agreement to acquire certain assets of Peterbilt of Louisiana, which will include real estate and several Peterbilt commercial vehicle franchises in Louisiana and Mississippi, along with commercial vehicle and parts inventory. We expect the purchase price to be $35.0 million, plus the value of the inventory on the closing date, with the purchase price paid in cash. We will continue to purchase vehicles for our lease and rental operations and authorize capital expenditures for the improvement or expansion of our existing dealership facilities and construction or purchase of new facilities based on market opportunities.

Current wording

We are currently under contract to construct a new facility in Conroe, Texas with a current budget of $20.0 million. We are also under contract to purchase certain dealership facilities for approximately $9.5 million in connection with our acquisition of the assets of Peterbilt of Louisiana. These purchases are expected to close in the third quarter of 2026.

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 2026, operating activities resulted in net cash provided by operations of $60.4 million. Net cash provided by operating activities primarily consisted of $61.7 million in net income, stock-based compensation of $14.5 million, cash used in floor plan financing of $36.2 million, provision for deferred income tax of $4.3 million as well as non-cash adjustments related to depreciation and amortization of $64.6 million. Cash used by operating activities included an aggregate of $48.5 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of $89.5 million from the increase in accounts payable, $6.2 million from the decrease in accounts receivable and $9.2 million from the increase in other current assets, which was offset primarily by cash outflows of $85.5 million from the increase in inventories, $25.6 million from the decrease in customer deposits and $42.3 million from the decrease 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 2026, operating activities resulted in net cash provided by operations of $193.7 million. Net cash provided by operating activities primarily consisted of $134.7 million in net income, stock-based compensation of $21.3 million, provision for deferred income tax of $6.4 million as well as non-cash adjustments related to depreciation and amortization of $129.8 million. Cash used in operating activities included an aggregate of $42.5 million in net changes in operating assets and liabilities, including cash outflows of $90.4 million from the increase in inventories, cash used in floor plan financing of $57.0 million, $22.6 million from the increase in accounts receivable, $19.4 million from the decrease in accrued expenses and $3.7 million from the decrease in customer deposits, which were offset by cash inflows of $66.6 million from the increase in accounts payable and $27.1 million from the decrease in prepaid expenses and other. Most of our commercial vehicle inventory is financed through our floor plan credit agreements.

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 2025, operating activities resulted in net cash provided by operations of $153.5 million. Net cash provided by operating activities primarily consisted of $60.6 million in net income, as well as non-cash adjustments related to depreciation and amortization of $61.5 million, and stock-based compensation of $13.7 million. Cash used by operating activities included an aggregate of $16.6 million net change in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of $75.4 million from the increase in accounts payable and $50.3 million from the decrease in accounts receivable, which was offset primarily by cash outflows of $77.0 million from the increase in inventories, $12.6 million from the decrease in customer deposits and $19.6 million from the decrease in accrued expenses. Most of our commercial vehicle inventory is financed through our floor plan credit agreements.

Current wording

During the first six months of 2025, operating activities resulted in net cash provided by operations of $381.2 million. Net cash provided by operating activities primarily consisted of $133.6 million in net income, as well as non-cash adjustments related to depreciation and amortization of $124.5 million, stock-based compensation of $22.0 million and cash inflows for deferred income tax expense of $0.5 million. Cash provided by operating activities included an aggregate of $107.7 million net changes in operating assets and liabilities. Included in the net change in operating assets and liabilities were cash inflows of $52.9 million from the increase in accounts payable, $40.7 million from the decrease in accounts receivable and $10.2 million from the decrease in inventories, which were offset by cash outflows of $8.1 million from the increase in other assets, $2.6 million from the decrease in customer deposits and $8.6 million from the increase in accrued expenses. Most of our commercial vehicle inventory is financed through our floor plan credit agreements.

Previous wording

During the first quarter of 2026, cash used in investing activities was $60.6 million. Cash flows used in investing activities consist primarily of cash used for the acquisition of property and equipment. Acquisition of property and equipment totaled $66.0 million during the first three months of 2026 and consisted of purchases of machinery and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $48.2 million for purchases of rental and lease vehicles for our rental and leasing operations.

Current wording

During the first six months of 2026, cash used in investing activities was $194.4 million. Cash flows used in investing activities consisted primarily of cash used for the acquisition of property and equipment and the acquisition of new businesses. See Note 12 of the Notes to Consolidated Financial Statements for a detailed discussion of the business acquisitions. Acquisition of property and equipment totaled $148.3 million during the first six months of 2026 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $130.3 million for purchases of rental and lease vehicles for our rental and leasing operations.

Previous wording

During the first quarter of 2025, cash used in investing activities was $97.2 million. Cash flows used in investing activities consist primarily of cash used for the acquisition of property and equipment. Acquisition of property and equipment totaled $109.1 million during the first three months of 2025 and consisted of purchases of machinery and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $94.0 million for purchases of rental and lease vehicles for our rental and leasing operations.

Current wording

During the first six months of 2025, cash used in investing activities was $232.2 million. Cash flows used in investing activities consisted primarily of cash used for the acquisition of property and equipment and the acquisition of new businesses. See Note 12 of the Notes to Consolidated Financial Statements for a detailed discussion of the business acquisitions. Acquisition of property and equipment totaled $222.3 million during the first six months of 2025 and consisted primarily of purchases of machine and shop equipment, furniture and fixtures, real estate and facilities, improvements to our existing dealership facilities and $182.1 million for purchases of rental and lease vehicles for our rental and leasing operations.

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 2025, financing **activities resulted in net cash used in financing activities of $56.4 million, primarily related to $288.4 million from borrowings of long-term debt and $6.2 million from the issuance of shares related to equity compensation plans. These cash inflows were offset by cash outflows of $0.6 million from net draws on floor plan notes payable, non-trade, $293.2 million used for principal repayments of long-term debt and finance lease obligations, $29.6 million used for repurchases of common stock, $9.4 million for taxes paid related to net share settlement of equity awards and $14.4 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 2026, financing activities resulted in net cash provided by financing activities of $53.4 million, primarily related to cash inflows of $21.4 million from the issuance of shares related to equity compensation plans, borrowings of $46.4 million of long-term debt and net draws of $95.9 million on floor plan notes payable, non-trade. These cash inflows were offset by $53.2 million used for principal repayments of long-term debt, $11.6 million used for principal repayments of finance lease obligations, $9.5 million for taxes related to net share settlement of equity awards, $5.4 million used for repurchases of common stock and $30.5 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

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 2026, financing** **activities resulted in net cash provided of $27.3 million, primarily related to $38.8 million from net draws on non-trade floor plan notes payable, $14.6 million from borrowings of long-term debt and $15.9 million from the issuance of shares related to equity compensation plans. These cash inflows were offset by cash outflows of $17.2 million used for principal repayments of long-term debt and finance lease obligations, $9.5 million for taxes paid related to net share settlement of equity awards and $15.3 million used for payment of cash dividends.

Current wording

During the first six months of 2025, financing** **activities resulted in net cash used by financing activities of $166.3 million, primarily related to cash inflows of $7.9 million from the issuance of shares related to equity compensation plans and borrowings of $644.4 million of long-term debt. These cash inflows were offset by $642.5 million used for principal repayments of long-term debt and capital lease obligations, $9.7 million for taxes related to net share settlement of equity awards, $117.1 million used for repurchases of common stock, $12.0 million used for net payments on floor plan notes payable and $28.9 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 a credit agreement with WF, the lenders signatory thereto (the “WF Lenders”) and WF as administrative agent (the “WF Credit Agreement”). 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 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 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, SOFR plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio. The WF Credit Agreement expires on September 30, 2028, although, upon the occurrence and during the continuance of an event of default, the 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, 2026, we had approximately $20.3 million outstanding under the WF Credit Agreement.

Current wording

On September 14, 2021, we entered into a credit agreement with WF, the lenders signatory thereto (the “WF Lenders”) and WF as administrative agent (the “WF Credit Agreement”). 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 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 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, SOFR plus (i) 1.25% or (ii) 1.5%, depending on our consolidated leverage ratio. The WF Credit Agreement expires on September 30, 2028, although, upon the occurrence and during the continuance of an event of default, the 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. On June 30, 2026, we had approximately $0.3 million outstanding under the WF Credit Agreement.

Previous wording

On November 1, 2023, we entered into that certain Second Amended and Restated Inventory Financing and Purchase Money Security Agreement with PACCAR Leasing Company (“PLC”), a division of Paccar Financing Corp. (“PFC”) (the “PLC Agreement”). Pursuant to the terms of the PLC Agreement (as amended), PLC agreed to make up to $500.0 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 $220.0 million or we are subject to an unused commitment fee 0.20% of the amount by which the average daily outstanding principal balance of the loan during such quarter is less than $220.0 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 2.10%, 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 16, 2029, although either party has the right to terminate the PLC Agreement at any time upon 360 days written notice. On March 31, 2026, we had approximately $220.0 million outstanding under the PLC Agreement.

Current wording

On November 1, 2023, we entered into that certain Second Amended and Restated Inventory Financing and Purchase Money Security Agreement with PACCAR Leasing Company (“PLC”), a division of Paccar Financing Corp. (“PFC”) (the “PLC Agreement”). Pursuant to the terms of the PLC Agreement (as amended), PLC agreed to make up to $500.0 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 $220.0 million or we are subject to an unused commitment fee 0.20% of the amount by which the average daily outstanding principal balance of the loan during such quarter is less than $220.0 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 2.10%, 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 16, 2029, although either party has the right to terminate the PLC Agreement at any time upon 360 days written notice. On June 30, 2026, we had approximately $220 million outstanding under the PLC 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 Bank of Montreal (“BMO”). Pursuant to the terms of the RTC Canada Revolving Credit Agreement (as amended), 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. Borrowings under the RTC Canada Revolving Credit Agreement bear interest per annum payable monthly at Canadian Overnight Repo Rate Average (“CORRA”), plus 1.72%. The RTC Canada Revolving Credit Agreement expires on September 14, 2026. On March 31, 2026, we had approximately $47.9 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 (as amended), 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. Borrowings under the RTC Canada Revolving Credit Agreement bear interest per annum payable monthly at Canadian Overnight Repo Rate Average (“CORRA”), plus 1.72%. As of June 30, 2026 the expiration date of the RTC Canada Revolving Credit Agreement was September 14, 2026, but pursuant to an amendment, the expiration date is now December 31, 2029. On June 30, 2026, we had approximately $74.3 million CAD outstanding under the RTC Canada Revolving Credit Agreement.