UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___________________________ to ____________________________________________
Commission File Number
RUSH ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) |
| incorporation or organization) | |
| (Address of principal executive offices) | |
| (Zip Code) | |
| ( | |
| (Registrant’s telephone number, including area code) | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller Reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes |
Indicated below is the number of shares outstanding of each of the issuer’s classes of common stock, as of October 30, 2020.
| Number of Shares | |
| Title of Class | Outstanding |
| Class A Common Stock, $.01 Par Value | |
| Class B Common Stock, $.01 Par Value |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | |
| | | |
INDEX
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares)
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable (less allowances for credit losses of $ and $, respectively) | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other | ||||||||
| Assets held for sale | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Goodwill, net | ||||||||
| Other assets, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Floor plan notes payable | $ | $ | ||||||
| Current maturities of long-term debt | ||||||||
| Current maturities of finance lease obligations | ||||||||
| Current maturities of operating lease obligations | ||||||||
| Trade accounts payable | ||||||||
| Customer deposits | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net of current maturities | ||||||||
| Finance lease obligations, net of current maturities | ||||||||
| Operating lease obligations, net of current maturities | ||||||||
| Other long-term liabilities | ||||||||
| Deferred income taxes, net | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, par value $ per share; shares authorized; shares outstanding in 2020 and 2019 | ||||||||
| Common stock, par value $ per share; Class A shares and Class B shares authorized; Class A shares and Class B shares outstanding in 2020; and Class A shares and Class B shares outstanding in 2019 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost: Class B shares in 2020 and Class A shares and Class B shares in 2019 | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Accumulated other comprehensive (loss) income | ( | ) | ||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Revenues |
||||||||||||||||
| New and used commercial vehicle sales |
$ | $ | $ | $ | ||||||||||||
| Aftermarket products and services sales |
||||||||||||||||
| Lease and rental |
||||||||||||||||
| Finance and insurance |
||||||||||||||||
| Other |
||||||||||||||||
| Total revenue |
||||||||||||||||
| Cost of products sold |
||||||||||||||||
| New and used commercial vehicle sales |
||||||||||||||||
| Aftermarket products and services sales |
||||||||||||||||
| Lease and rental |
||||||||||||||||
| Total cost of products sold |
||||||||||||||||
| Gross profit |
||||||||||||||||
| Selling, general and administrative expense |
||||||||||||||||
| Depreciation and amortization expense |
||||||||||||||||
| Gain (loss) on sale of assets |
( |
) | ||||||||||||||
| Operating income |
||||||||||||||||
| Other income |
||||||||||||||||
| Interest expense, net |
||||||||||||||||
| Income before taxes |
||||||||||||||||
| Income tax provision |
||||||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| Earnings per common share: |
||||||||||||||||
| Basic |
$ | $ | $ | $ | ||||||||||||
| Diluted |
$ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
||||||||||||||||
| Dividends declared per common share |
$ | $ | $ | $ | ||||||||||||
| Comprehensive income |
$ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In Thousands)
(Unaudited)
| Common Stock |
Accumulated |
|||||||||||||||||||||||||||||||
| Shares |
$0.01 | Additional |
Other |
|||||||||||||||||||||||||||||
| Outstanding |
Par |
Paid-In |
Treasury |
Retained |
Comprehensive |
|||||||||||||||||||||||||||
| Class A | Class B | Value | Capital | Stock | Earnings | (Loss)Income | Total | |||||||||||||||||||||||||
| Balance, December 31, 2019 |
$ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||
| Stock options exercised and stock awards |
||||||||||||||||||||||||||||||||
| Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | ||||||||||||||||||||||||||||||
| Vesting of restricted share awards |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan |
||||||||||||||||||||||||||||||||
| Common stock repurchases |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Dividend Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | ||||||||||||||||||||||
| Dividend Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | ||||||||||||||||||||||
| Other comprehensive loss |
– | – | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net income |
– | – | ||||||||||||||||||||||||||||||
| Balance, March 31, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock options exercised and stock awards |
||||||||||||||||||||||||||||||||
| Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | ||||||||||||||||||||||||||||||
| Vesting of restricted share awards |
– | – | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Dividend Class A common stock |
– | – | – | – | – | ( |
) | – | ( |
) | ||||||||||||||||||||||
| Dividend Class B common stock |
– | – | – | – | – | ( |
) | – | ( |
) | ||||||||||||||||||||||
| Other comprehensive income |
– | – | ||||||||||||||||||||||||||||||
| Net income |
– | – | ||||||||||||||||||||||||||||||
| Balance, June 30, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock options exercised and stock awards |
||||||||||||||||||||||||||||||||
| Stock-based compensation related to stock options, restricted shares and employee stock purchase plan |
– | – | ||||||||||||||||||||||||||||||
| Vesting of restricted share awards |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan |
||||||||||||||||||||||||||||||||
| Common stock repurchases |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Cancellation of treasury stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Dividend Class A common stock |
– | – | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Dividend Class B common stock |
– | – | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Other comprehensive income |
– | – | ||||||||||||||||||||||||||||||
| Net income |
– | – | ||||||||||||||||||||||||||||||
| Balance, September 30, 2020 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||
| Common Stock | Accumulated | |||||||||||||||||||||||||||||||
| Shares | $0.01 | Additional | Other | |||||||||||||||||||||||||||||
| Outstanding | Par | Paid-In | Treasury | Retained | Comprehensive | |||||||||||||||||||||||||||
| Class A | Class B | Value | Capital | Stock | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||
| Balance, December 31, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Stock options exercised and stock awards | ||||||||||||||||||||||||||||||||
| Stock-based compensation related to stock options, restricted shares and employee stock purchase plan | – | – | ||||||||||||||||||||||||||||||
| Vesting of restricted share awards | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | ||||||||||||||||||||||||||||||||
| Common stock repurchases | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Dividend Class A common stock | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||
| Dividend Class B common stock | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||
| Other comprehensive income | – | – | ||||||||||||||||||||||||||||||
| Net income | – | – | ||||||||||||||||||||||||||||||
| Balance, March 31, 2019 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Stock options exercised and stock awards | ||||||||||||||||||||||||||||||||
| Stock-based compensation related to stock options, restricted shares and employee stock purchase plan | – | – | ||||||||||||||||||||||||||||||
| Vesting of restricted share awards | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Common stock repurchases | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Dividend Class A common stock | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||
| Dividend Class B common stock | – | – | – | – | – | ( | ) | – | ( | ) | ||||||||||||||||||||||
| Other comprehensive loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income | – | – | ||||||||||||||||||||||||||||||
| Balance, June 30, 2019 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock options exercised and stock awards | ||||||||||||||||||||||||||||||||
| Stock-based compensation related to stock options, restricted shares and employee stock purchase plan | – | – | ||||||||||||||||||||||||||||||
| Vesting of restricted share awards | – | – | ||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | ||||||||||||||||||||||||||||||||
| Common stock repurchases | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Dividend Class A common stock | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Dividend Class B common stock | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Other comprehensive income | – | – | ||||||||||||||||||||||||||||||
| Net income | – | – | ||||||||||||||||||||||||||||||
| Balance, September 30, 2019 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| (Gain) loss on sale of property and equipment | ( | ) | ||||||
| Stock-based compensation expense related to stock options and employee stock purchases | ||||||||
| Deferred income tax (benefit) expense | ( | ) | ||||||
| Change in accounts receivable, net | ( | ) | ||||||
| Change in inventories, net | ||||||||
| Change in prepaid expenses and other, net | ( | ) | ||||||
| Change in trade accounts payable | ( | ) | ||||||
| Payments on floor plan notes payable – trade, net | ( | ) | ( | ) | ||||
| Change in customer deposits | ( | ) | ( | ) | ||||
| Change in accrued expenses | ( | ) | ||||||
| Other, net | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from the sale of property and equipment | ||||||||
| Business acquisitions | ( | ) | ||||||
| Purchase of equity method investment and call option | ( | ) | ||||||
| Change in other assets | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| (Payments) draws on floor plan notes payable – non-trade, net | ( | ) | ||||||
| Proceeds from long-term debt | ||||||||
| Draws on line of credit | ||||||||
| Principal payments on long-term debt | ( | ) | ( | ) | ||||
| Principal payments on finance lease obligations | ( | ) | ( | ) | ||||
| Payments on line of credit | ( | ) | ||||||
| Proceeds from issuance of shares relating to employee stock options and employee stock purchases | ||||||||
| Payments of cash dividends | ( | ) | ( | ) | ||||
| Common stock repurchased | ( | ) | ( | ) | ||||
| Debt issuance costs | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes, net of refunds | $ | $ | ||||||
| Noncash investing and financing activities: | ||||||||
| Assets acquired under finance leases | $ | $ | ||||||
| Common stock repurchased | $ | $ | ||||||
| Guaranty agreement | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
RUSH ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 – Principles of Consolidation and Basis of Presentation
The interim consolidated financial statements included herein have been prepared by Rush Enterprises, Inc. and its subsidiaries (collectively referred to as the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All adjustments have been made to the accompanying interim consolidated financial statements, which, in the opinion of the Company’s management, are necessary for a fair presentation of its operating results. All adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is recommended that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.
Stock Split
On September 15, 2020, the Board of Directors of the Company declared a
Adoption of New Accounting Pronouncements
Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments, was issued in June 2016. Under Topic 326, existing guidance on reporting credit losses for trade and other receivables, held-to-maturity debt securities and other instruments have been replaced with a new forward-looking "expected loss" model that results in the earlier recognition of allowances for losses. Under Topic 326, the Company is required to use a current expected credit loss (“CECL”) model that immediately recognizes an estimate of credit losses that are expected to occur over the life of the financial instruments that are within the scope of Topic 326. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. The Company adopted Topic 326 on January 1, 2020, and the new standard did not result in a material impact on its consolidated financial statements. For a complete discussion of accounting for credit losses, see Note 12 – Accounts Receivable and Allowance for Credit Losses of the Notes to Consolidated Financial Statements.
COVID-19 Risks and Uncertainties
In March 2020, the World Health Organization made the assessment that COVID-19 could be characterized as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The Company’s nationwide network of commercial vehicle dealerships are classified as “essential businesses” and have remained operational across the Company’s dealership network. Despite the dealerships remaining open, the COVID-19 pandemic had a significant negative impact on our financial results during the quarter ended September 30, 2020. The Company is unable to predict the impact that the COVID-19 pandemic will have on its future business and operating results due to numerous uncertainties, including the duration and severity of the outbreak.
2 –Other Assets
ERP Platform
The total capitalized costs of the Company’s SAP enterprise resource planning software platform (“the ERP Platform”) of $
Franchise Rights
The Company’s only significant identifiable intangible assets, other than goodwill, are rights under franchise agreements with manufacturers. The fair value of the franchise right is determined at the acquisition date by discounting the projected cash flows specific to each acquisition. The carrying value of the Company’s manufacturer franchise rights was $
Due to the fact that manufacturer franchise rights are specific to geographic region, the Company has determined that evaluating and including all locations acquired in the geographic region is the appropriate level for purposes of testing franchise rights for impairment. Management reviews indefinite-lived manufacturer franchise rights for impairment annually during the fourth quarter, or more often if events or circumstances indicate that an impairment may have occurred. The Company is subject to financial statement risk to the extent that manufacturer franchise rights become impaired due to decreases in the fair market value of its individual franchises.
The significant estimates and assumptions used by management in assessing the recoverability of manufacturer franchise rights include estimated future cash flows, present value discount rate and other factors. Any changes in these estimates or assumptions could result in an impairment charge. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s subjective judgment. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluations of manufacturer franchise rights can vary within a range of outcomes.
Equity Method Investment and Call Option
On February 25, 2019, the Company acquired
On April 25, 2019, the Company entered into a Guaranty Agreement (“Guaranty”) with Bank of Montreal (“BMO”), pursuant to which the Company agreed to guaranty up to million (the “Guaranty Cap”) of certain credit facilities entered into by and between Tallman Truck Centre Limited (“TTCL”) and BMO. The Company owned a
3 – Commitments and Contingencies
From time to time, the Company is involved in litigation arising out of its operations in the ordinary course of business. The Company maintains liability insurance, including product liability coverage, in amounts deemed adequate by management. To date, aggregate costs to us for claims, including product liability actions, have not been material. However, an uninsured or partially insured claim, or claim for which indemnification is not available, could have a material adverse effect on the Company’s financial condition or results of operations. The Company believes that there are no claims or litigation pending, the outcome of which could have a material adverse effect on its financial position or results of operations. However, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations for the fiscal period in which such resolution occurred.
4 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share information):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Numerator: | ||||||||||||||||
| Numerator for basic and diluted earnings per share – Net income available to common shareholders | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Denominator for basic earnings per share – weighted average shares outstanding | ||||||||||||||||
| Effect of dilutive securities– Employee and director stock options and restricted share awards | ||||||||||||||||
| Denominator for diluted earnings per share – adjusted weighted average shares outstanding and assumed conversions | ||||||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | ||||||||||||
| Diluted earnings per common share and common share equivalents | $ | $ | $ | $ | ||||||||||||
Options to purchase shares of common stock that were outstanding for the three months and nine months ended September 30, 2020 and 2019 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive are as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Weighted average anti-dilutive options | ||||||||||||||||
5 – Stock Options and Restricted Stock Awards
Valuation and Expense Information
The Company accounts for stock-based compensation in accordance with ASC 718-10, Compensation – Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including employee stock options, restricted stock unit awards, restricted stock awards and employee stock purchases related to the Employee Stock Purchase Plan based on estimated fair values.
Stock-based compensation expense, calculated using the Black-Scholes option-pricing model for employee stock options and included in selling, general and administrative expense, was $
As of September 30, 2020, the Company had $
6 – Financial Instruments and Fair Value
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Financial instruments consist primarily of cash, accounts receivable, accounts payable and floor plan notes payable. The carrying values of the Company’s financial instruments approximate fair value due either to their short-term nature or existence of variable interest rates, which approximate market rates. Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments at September 30, 2020, and December 31, 2019. The carrying value of current assets and current liabilities approximates the fair value due to the short maturity of these items.
The fair value of the Company’s long-term debt is based on secondary market indicators. Because the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rate, credit rating, collateral and liquidity. Accordingly, the Company concluded that the valuation measurement inputs of its long-term debt represent, at its lowest level, current market interest rates available to the Company for similar debt and the Company’s current credit standing. The carrying amount of such debt approximates fair value.
7 – Segment Information
The Company currently has reportable business segment - the Truck Segment. The Truck Segment includes the Company’s operation of a nationwide network of commercial vehicle dealerships that provide an integrated one-stop source for the commercial vehicle needs of its customers, including retail sales of new and used commercial vehicles; aftermarket parts, service and collision center facilities; and financial services, including the financing of new and used commercial vehicle purchases, insurance products and truck leasing and rentals. The commercial vehicle dealerships are deemed a single reporting unit because they have similar economic characteristics. The Company’s chief operating decision maker considers the entire Truck Segment, not individual dealerships or departments within its dealerships, when making decisions about resources to be allocated to the segment and assessing its performance.
The Company also has revenues attributable to other operating segments. These segments include a retail tire company, an insurance agency and a guest ranch operation and are included in the All Other column below. None of these segments has ever met any of the quantitative thresholds for determining reportable segments.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on operating income.
The following table contains summarized information about reportable segment revenues, segment income or loss from continuing operations and segment assets for the periods ended September 30, 2020 and 2019 (in thousands):
| Truck Segment |
All Other |
Total |
||||||||||
| As of and for the three months ended September 30, 2020 |
||||||||||||
| Revenues from external customers |
$ | $ | $ | |||||||||
| Segment operating income |
||||||||||||
| Segment income before taxes |
||||||||||||
| Segment assets |
||||||||||||
| For the nine months ended September 30, 2020 |
||||||||||||
| Revenues from external customers |
$ | $ | $ | |||||||||
| Segment operating income |
||||||||||||
| Segment income before taxes |
||||||||||||
| As of and for the three months ended September 30, 2019 |
||||||||||||
| Revenues from external customers |
$ | $ | $ | |||||||||
| Segment operating income (loss) |
( |
) | ||||||||||
| Segment income before taxes |
||||||||||||
| Segment assets |
||||||||||||
| For the nine months ended September 30, 2019 |
||||||||||||
| Revenues from external customers |
$ | $ | $ | |||||||||
| Segment operating income |
||||||||||||
| Segment income before taxes |
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8 – Income Taxes
The Company had unrecognized income tax benefits totaling $
The Company does not anticipate a significant change in the amount of unrecognized tax benefits in the next 12 months. As of September 30, 2020, the tax years ended December 31, 2016 through remained subject to audit by federal tax authorities, and the tax years ended December 31, 2015 through remained subject to audit by state tax authorities.
Coronavirus Aid, Relief, and Economic Security Act (the CARES Act)
In response to the COVID-19 pandemic, on March 27, 2020, President Donald Trump signed into law the CARES Act. The Company evaluated the provisions of the CARES Act as of September 30, 2020, with no material effect on the financial statements. Provisions of the CARES Act may result in deferral of payment of certain taxes.
9 – Revenue
The Company’s revenues are primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue for such sales is recognized when the customer obtains control, which is typically when the finished product is delivered to the customer. The Company’s material revenue streams have been identified as the following: the sale of new and used commercial vehicles, arrangement of associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle parts. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
The following table summarizes the Company’s disaggregated revenue by revenue source for the three months and nine months ended September 30, 2020 and 2019 (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
| Commercial vehicle sales revenue | $ | $ | $ | $ | ||||||||||||
| Parts revenue | ||||||||||||||||
| Commercial vehicle repair service revenue | ||||||||||||||||
| Finance revenue | ||||||||||||||||
| Insurance revenue | ||||||||||||||||
| Other revenue | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
All of the Company's performance obligations are generally transferred to customers at a point in time. The Company does not have any material contract assets or contract liabilities on the balance sheet as of September 30, 2020 or December 31, 2019. Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of other revenues are related to the Truck Segment.
10 – Leases
Lease of Vehicles as Lessor
The Company leases commercial vehicles to customers primarily over periods of to years. The Company does not separate lease and nonlease components. Nonlease components typically consist of maintenance and licensing for the commercial vehicle. The variable nonlease components are generally based on mileage. Some leases contain an option for the lessee to purchase the commercial vehicle.
The Company’s policy is to depreciate its lease fleet using a straight-line method over each customer’s contractual lease term. The lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term. This policy results in the Company realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term.
Sales-type leases are recognized by the Company as lease receivables. The lessee obtains control of the underlying asset and the Company recognizes sales revenue upon lease commencement. The receivable for sales-type leases was $
Lease and rental income during the three and nine months ended September 30, 2020, and September 30, 2019, consisted of the following (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
| Minimum rental payments | $ | $ | $ | $ | ||||||||||||