UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2010

Commission file number 0-20797

RUSH ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Texas		74-1733016
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
555 IH 35 South, New Braunfels, TX		78130
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (830) 626-5200

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

Class A and Class B Common Stock, $.01 par value		NASDAQ Global Select Market
Title of each class		Name of each exchange on which registered

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o      No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o      No þ

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

Yes þ      No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes o      No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller Reporting Company o
				(Do not check if a smaller reporting company.)

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

Yes o      No þ

The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2010 was approximately $429,864,022 based upon the last sales price on June 30, 2010 on The NASDAQ Global Select Market^SM of $13.36 for the registrant’s Class A common stock and $11.65 for the registrant’s Class B common stock. Shares of common stock held by each executive officer and director and by each shareholder affiliated with a director or an executive officer have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The registrant had 26,923,258 shares Class A common stock and 10,705,346 shares of Class B common stock outstanding on March 9, 2011.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of registrant’s definitive proxy statement for the registrant’s 2011 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than April 30, 2011, are incorporated by reference into Part III of this Form 10-K.

 

 

RUSH ENTERPRISES, INC.

Index to Form 10-K

Year ended December 31, 2010

		Page No.
Part I
Item 1 Business			2
Item 1A Risk Factors			13
Item 1B Unresolved Staff Comments			20
Item 2 Properties			20
Item 3 Legal Proceedings			20
Part II
Item 5 Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			21
Item 6 Selected Financial Data			23
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 7A Quantitative and Qualitative Disclosures about Market Risk			38
Item 8 Financial Statements and Supplementary Data			40
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			71
Item 9A Controls and Procedures			72
Item 9B Other Information			73
Part III
Item 10 Directors and Executive Officers of the Registrant			74
Item 11 Executive Compensation			74
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters			74
Item 13 Certain Relationships and Related Transactions			74
Item 14 Principal Accountant Fees and Services			74
Part IV
Item 15 Exhibits and Financial Statement Schedules			75
Exhibit 10.10
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-K (or otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission, news releases, conferences, website postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended(the “Exchange Act”), notwithstanding that such statements are not specifically identified. Forward-looking statements include statements about the Company’s financial position, business strategy and plans and objectives of management of the Company for future operations. These forward-looking statements reflect the best judgments of the Company about the future events and trends based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements reflect the current view of the Company with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those set forth under Item 1A—Risk Factors as well as future growth rates and margins for certain of our products and services, future demand for our products and services, competitive factors, general economic conditions, cyclicality, market conditions in the new and used commercial vehicle markets, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, one-time events and other factors described herein and in the Company’s quarterly and other reports filed with the Securities and Exchange Commission (collectively, “Cautionary Statements”). Although the Company believes that its expectations are reasonable, it can give no assurance that such expectations will prove to be correct. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the applicable Cautionary Statements. All forward-looking statements speak only as the date on which they are made and the Company undertakes no duty to update or revise any forward-looking statements.

NOTE REGARDING INCORPORATION BY REFERENCE

The Securities and Exchange Commission (“SEC”) allows us to disclose important information to you by referring you to other documents we have filed with the SEC. The information we refer to is “incorporated by reference” into this Form 10-K. Please read that information.

NOTE REGARDING TRADEMARKS USED IN THIS FORM 10-K

Peterbilt^® is a registered trademark of Peterbilt Motors Company. PACCAR^® is a registered trademark of PACCAR, Inc. GMC^® is a registered trademark of General Motors Corporation. Hino^® is a registered trademark of Hino Motors, Ltd. UD^® is a registered trademark of UD Truck North America, Ltd. Isuzu^® is a registered trademark of Isuzu Motors Limited. John Deere^® is a registered trademark of Deere & Company. Kenworth^® is a registered trademark of PACCAR, Inc. doing business as Kenworth Truck Company. Volvo^® is a registered trademark of Volvo Trademark Holding AB. Freightliner^® is a registered trademark of Freightliner Corporation. Mack^® is a registered trademark of Mack Trucks, Inc. Navistar^® is a registered trademark of Navistar International Corporation. Caterpillar^® is a registered trademark of Caterpillar, Inc. PacLease^® is a registered trademark of PACCAR Leasing Corporation. CitiCapital^® is a registered trademark of Citicorp. Ford^® is a registered trademark of Ford Motor Company. Cummins^® is a registered trademark of Cummins Intellectual Property, Inc. Eaton^® is a registered trademark of Eaton Corporation. Arvin Meritor^® is a registered trademark of Meritor Technology, Inc. JPMorgan Chase^® is a registered trademark of JP Morgan Chase & Co. SAP^® is a registered trademark of SAP Aktiengesellschaft. International^® is a registered trademark of Navistar International Transportation Corp. Blue Bird^® is a registered trademark of Blue Bird Investment Corporation. Autocar^® is a registered trademark of Shem, LLC. IC Bus^® is a registered trademark of IC Bus, LLC. Collins Bus Corporation^® is a registered trademark of Collins Bus Corporation. Fuso^® is a registered trademark of Mitsubishi Fuso Truck and Bus Corporation. Workhorse^® is a registered trademark of Workhorse Custom Chassis, LLC.

PART I

Item 1.		Business

References herein to “the Company,” “Rush Enterprises,” “Rush,” “we,” “our” or “us” mean Rush Enterprises, Inc., a Texas corporation, and its subsidiaries unless the context requires otherwise.

Access to Company Information

Rush electronically files annual reports, quarterly reports, and other reports with the SEC. You may read and copy any of the materials that we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street NE, NW, Washington, DC 20549. You may obtain information about the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also available to you on the SEC’s website at www.sec.gov.

Rush makes certain of our SEC filings available, free of charge, through our website, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports. These filings are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Rush’s website address is www.rushenterprises.com. The information contained on our website, or on other websites linked to our website, is not part of this document.

General

Rush Enterprises, Inc. was incorporated in Texas in 1965 and consists of one reportable segment, the Truck Segment. The Company conducts business through numerous subsidiaries, all of which it wholly owns, directly or indirectly. Its principal offices are located at 555 IH 35 South, Suite 500, New Braunfels, Texas 78130.

The Company is a full-service, integrated retailer of commercial vehicles and related services. The Truck Segment operates a regional network of commercial vehicle dealerships under the name “Rush Truck Centers.” Rush Truck Centers primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, UD, Ford, Isuzu, Mitsubishi Fuso, IC Bus or Blue Bird. Through its strategically located network of Rush Truck Centers, the Company provides one-stop service for the needs of its commercial vehicle customers, including retail sales of new and used commercial vehicles, aftermarket parts sales, service and repair facilities, and financing, leasing and rental, and insurance products.

The Company’s Rush Truck Centers are principally located in high traffic areas throughout the United States. Since commencing operations as a Peterbilt heavy-duty truck dealer in 1966, the Company has grown to operate more than 60 Rush Truck Centers in Alabama, Arizona, California, Colorado, Florida, Georgia, Idaho, New Mexico, North Carolina, Oklahoma, Oregon, Tennessee, Texas and Utah.

Our business strategy consists of providing our customers with competitively priced products supported with timely and reliable service through our integrated dealer network. We intend to continue to implement our business strategy, reinforce customer loyalty and remain a market leader by continuing to develop our Rush Truck Centers as we extend our geographic focus through strategic acquisitions of new locations and expansions of our existing facilities and product lines.

The Construction Equipment Segment will no longer be reported as a separate business segment due to the Company’s disposition of its John Deere construction equipment business in September 2010. Operating results of the Construction Equipment Segment have been classified as discontinued operations in the financial statements and related discussion and analysis below.

Rush Truck Centers. Our Rush Truck Centers are located in Alabama, Arizona, California, Colorado, Florida, Georgia, Idaho, New Mexico, North Carolina, Oklahoma, Oregon, Tennessee, Texas and Utah. The following chart reflects our franchises and parts, service and body shop operations by location.

Rush Truck Center		Heavy-Duty		Medium-Duty and Bus						Body
Location		Franchise(s)		Franchise(s)		Parts		Service		Shop
Alabama:
Mobile		Peterbilt		Peterbilt		Yes		Yes		Yes
Arizona:
Flagstaff		None		None		Yes		Yes		No
Phoenix		Peterbilt		Peterbilt, Hino		Yes		Yes		Yes
Tucson		Peterbilt		Peterbilt, Hino		Yes		Yes		No
Yuma		Peterbilt		Peterbilt		Yes		Yes		No
California:
Escondido		Peterbilt		Peterbilt, Hino		Yes		Yes		No
Fontana Heavy-Duty		Peterbilt		Peterbilt		Yes		Yes		Yes
Fontana Medium-Duty		None		Peterbilt, Hino, Isuzu, UD		Yes		Yes		No
Pico Rivera		Peterbilt		Peterbilt		Yes		Yes		Yes
San Diego		Peterbilt		Peterbilt, Hino		Yes		Yes		Yes
San Luis Obispo		None		None		Yes		Yes		No
Sylmar		Peterbilt		Peterbilt, UD		Yes		Yes		No
Colorado:
Denver Heavy-Duty		Peterbilt		Peterbilt		Yes		Yes		Yes
Denver Medium-Duty		None		Ford, Isuzu		Yes		Yes		No
Greeley		Peterbilt		Peterbilt		Yes		Yes		No
Pueblo		Peterbilt		Peterbilt		Yes		Yes		No
Florida:
Haines City		Peterbilt		Peterbilt, Diamond Coach		Yes		Yes		Yes
Jacksonville		Peterbilt		Peterbilt, Hino, Diamond Coach		Yes		Yes		Yes
Orlando		None		Isuzu		Yes		Yes		No
Orlando		None		Ford		Yes		Yes		Yes
Tampa		Peterbilt		Peterbilt, Diamond Coach		Yes		Yes		No
Winter Garden		Peterbilt		Peterbilt, Isuzu, UD, Diamond Coach		Yes		Yes		No
Georgia:
Atlanta		None		Hino, Isuzu, UD		Yes		Yes		No
Idaho:
Boise		International		International, IC Bus, Autocar, Kalmar		Yes		Yes		Yes
Heyburn		International		International		Yes		Yes		No
Idaho Falls		International		International, IC Bus, Kalmar		Yes		Yes		Yes
Lewiston		International		International		Yes		Yes		No
Twin Falls		International		International		Yes		Yes		No
New Mexico:
Albuquerque		Peterbilt		Peterbilt		Yes		Yes		Yes
Las Cruces		Peterbilt		Peterbilt		Yes		Yes		No

Rush Truck Center		Heavy-Duty		Medium-Duty and Bus						Body
Location		Franchise(s)		Franchise(s)		Parts		Service		Shop
North Carolina:
Charlotte		Peterbilt		Peterbilt, Hino, Isuzu		Yes		Yes		No
Charlotte		International		International, Workhorse		Yes		Yes		Yes
Oklahoma:
Ardmore		Peterbilt		Peterbilt		Yes		Yes		No
Oklahoma City		Peterbilt		Peterbilt, Hino, Ford, Isuzu		Yes		Yes		Yes
Tulsa		Peterbilt		Peterbilt, Hino		Yes		Yes		Yes
Oregon:
Ontario		International		International		Yes		Yes		No
Tennessee:
Nashville		Peterbilt		Peterbilt		Yes		Yes		Yes
Texas:
Abilene		Peterbilt		Peterbilt		Yes		Yes		No
Alice		Peterbilt		Peterbilt, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		No
Austin		Peterbilt		Peterbilt, Hino, Isuzu, UD, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		No
Dallas Heavy-Duty		Peterbilt		Peterbilt, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		Yes
Dallas Medium-Duty		None		Peterbilt, Hino, UD, Blue Bird, Elkhart Diamond Coach		Yes		Yes		No
Dallas		None		Ford, Isuzu		Yes		Yes		No
El Paso		Peterbilt		Peterbilt, Hino, Isuzu		Yes		Yes		Yes
Fort Worth		Peterbilt		Peterbilt, UD, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		No
Houston		Peterbilt		Peterbilt, Hino, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		Yes
Laredo		Peterbilt		Peterbilt, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		Yes
Lufkin		Peterbilt		Peterbilt, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		Yes
Pharr		Peterbilt		Peterbilt, Hino, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		Yes
San Antonio		Peterbilt		Peterbilt, Hino, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		Yes
Sealy		Peterbilt		Peterbilt, Isuzu, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		No
Texarkana		Peterbilt		Peterbilt, Hino, Isuzu, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		No
Tyler		Peterbilt		Peterbilt, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		No
Waco		Peterbilt		Peterbilt, Hino, Isuzu, Blue Bird, Elkhart, Diamond Coach		Yes		Yes		No
Utah:
Helper		International		International		Yes		Yes		No
Farr West		International		International, IC Bus		Yes		Yes		No
Salt Lake City		International		International, IC Bus, Autocar, Mitsubishi Fuso, Workhorse		Yes		Yes		Yes
Springville		International		International, Mitsubishi Fuso		Yes		Yes		No
St. George		International		International, Mitsubishi Fuso		Yes		Yes		No

Leasing and Rental Services. Through certain of our Rush Truck Centers and several stand-alone Rush Truck Leasing Centers, we provide a broad line of product selections for lease or rent, including Class 4, Class 5, Class 6, Class 7 and Class 8 trucks, heavy-duty cranes and refuse haulers. Our lease and rental fleets are offered on a daily, monthly or long-term basis.

Financial and Insurance Products. At our dealerships we offer third-party financing to assist customers in purchasing new and used commercial vehicles. Additionally, we sell, as agent, a complete line of property and casualty insurance, including collision and liability insurance on commercial vehicles, cargo insurance and credit life insurance.

Industry

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry” for a description of our industry and the markets in which we operate.

Our Business Strategy

Operating Strategy. Our strategy is to operate an integrated dealer network that provides complementary products and services. Our strategy includes the following key elements:

•

One-Stop Centers. We have developed our commercial vehicle dealerships as “one-stop centers” where, at one convenient location, our customers can do the following: purchase new and used commercial vehicles; finance, lease or rent commercial vehicles; purchase aftermarket parts and accessories; and have service performed by certified technicians. We believe that this full-service strategy also helps to mitigate cyclical economic fluctuations because the parts and service sales at our dealerships generally tend to be less volatile than our new and used commercial vehicle sales.

•

Branding Program. We employ a branding program for our dealerships through distinctive signage and uniform marketing programs to take advantage of our existing name recognition and to communicate the standardized high quality of our products and reliability of our services throughout our dealership network.

•

Management by Dealership Units. At each of our dealerships, we operate one or more of the following departments: new sales, used sales, financial services, parts, service or body shop. Our general managers measure and manage the operations of each of our dealerships according to the specific departments operating at that location. We believe that this system enhances the profitability of all aspects of a dealership and increases our overall operating margins. Operating goals for each department at each of our dealerships are established annually and managers are rewarded for performance.

•

Integrated Management Information Systems. In order to efficiently operate separate departments within each dealership, we rely upon our management information systems to determine and monitor appropriate inventory levels and product mix at each Rush Truck Center. Our parts reordering system assists each Rush Truck Center in maintaining the proper inventory levels and typically permits inventory delivery to each location, or directly to customers, within 24 hours from the time the order is placed. In addition, by actively monitoring market conditions, assessing product and expansion strategies and remaining abreast of changes within the market, we are able to proactively address market-by-market changes by realigning and, if necessary, adding product lines and models.

Growth Strategy. Through our expansion and acquisition initiatives, we have grown to operate a large, multistate, full-service network of commercial vehicle dealerships. As described below, we intend to continue to grow our business internally and through acquisitions by expanding into new geographic areas, expanding our product offerings and opening new dealerships in existing markets.

•

Expansion Into New Geographic Areas. We plan to continue to expand our dealership network by acquiring additional dealerships in geographic areas contiguous to our current operations. We have successfully expanded our presence from our Texas base into a coast-to-coast network of Rush Truck Centers. We believe the geographic diversity of our Rush Truck Center network has significantly expanded our customer base while reducing the effects of local economic cycles. Geographic diversification supports the sale of commercial vehicles and parts by allowing us to allocate our inventory among the geographic regions we serve based on market demand within these regions.

•

Expansion of Product Offerings. We intend to continue to expand our product lines within our dealerships by adding product categories that are both complementary to our existing product lines and well suited to our operating model such as truck mounted cranes, refuse vehicles and towing vehicles.

We believe that there are many additional product and service offerings that would complement our primary product lines. We expect any product category expansion that we pursue to satisfy our requirements that:

•

the products serve a commercial customer base;

•

the products provide opportunities for incremental income through related aftermarket sales, service or financing; and

•

Rush operating controls can be implemented to enhance the financial performance of the business.

•

Open New Rush Truck Centers in Existing Areas of Operation. We continually evaluate opportunities to increase our market share by adding new Rush Truck Centers to underserved markets within our current areas of operation. The introduction of additional Rush Truck Centers enables us to enhance revenues from our existing customer base as well as increase the awareness of the “Rush” brand name for new customers. In identifying new areas for expansion, we analyze the market’s level of new truck registrations, customer buying and leasing trends and the existence of competing franchises. We also assess the potential performance of a parts and service center. After a market has been strategically reviewed, we survey the region for a well-situated location. Whether we acquire existing dealerships or open a new dealership, we introduce our branding program and implement our integrated management system.

Management of Our Dealerships

We manage our dealerships as described below.

Rush Truck Centers

Our Rush Truck Centers are responsible for sales of new and used commercial vehicles, as well as related parts and services.

New Truck Sales. New heavy-duty truck sales represent the largest portion of our revenue, accounting for approximately $595.4 million, or 39.7%, of our total revenues in 2010. New Class 8 heavy-duty Peterbilt truck sales accounted for approximately 70.3% of our new truck revenues for 2010.

Our Rush Truck Centers that sell new and used Class 8 heavy-duty trucks also sell medium-duty commercial vehicles. Certain Rush Truck Centers sell medium-duty trucks manufactured by Peterbilt, Hino, Isuzu, Ford, International, Mitsubishi Fuso or UD and buses manufactured by Blue Bird, Diamond Coach, IC BUS and Elkhart (see Part I, Item 1, “General — Rush Truck Centers” for information on which brands we sell at each Rush Truck Center). New medium-duty commercial vehicle sales, excluding new bus sales, accounted for approximately $148.8 million, or 9.9% of our total revenues for 2010, and 18.9% of our new commercial vehicles revenues for 2010. Our customers use heavy- and medium-duty trucks to haul various materials, including general freight, petroleum, wood products, refuse and construction materials. New bus sales accounted for approximately $41.3 million, or 2.8% of our total revenues for 2010, and 5.24% of our new truck revenues for 2010.

A significant portion of our new truck sales are to fleet customers (customers who purchase more than five trucks in any 12-month period). Because of the size of our Rush Truck Center network, our strong relationships with our fleet customers and our ability to handle large quantities of used truck trade-ins, we are able to successfully market and sell to fleet customers nationwide. We believe that we have a competitive advantage over most other dealers in that we can absorb multi-unit trade-ins often associated with fleet sales and effectively disperse the used trucks for resale throughout our dealership network. We believe that our attention to customer service and our broad range of trucking services, including our ability to offer commercial vehicle financing and insurance to our customers, has resulted in a high level of customer loyalty.

Used Commercial Vehicle Sales. Used commercial vehicle sales accounted for approximately $139.0 million, or 9.3%, of our total revenues for 2010. We sell used commercial vehicles at most of our Rush Truck Centers. We believe that we are well positioned to market used commercial vehicles due to our ability to recondition them for resale utilizing the parts and service departments of our Rush Truck Centers and our ability to move used commercial vehicles between Rush Truck Centers to satisfy customer demand. The majority of our used commercial vehicle inventory consists of commercial vehicles taken as trade-ins from new customers, but we supplement our used commercial vehicle inventory by purchasing used commercial vehicles from third parties for resale.

Commercial Vehicle Parts and Service. Commercial vehicle related parts and service revenues accounted for approximately $489.3 million, or 32.7%, of our total revenues for 2010. The parts business enhances our sales and service functions and is a source of recurring revenue. Rush Truck Centers carry a wide variety of commercial vehicle parts in inventory. Certain Rush Truck Centers also feature fully equipped service and body shop facilities, the combination and configuration of which varies by location, capable of handling a broad range of repairs on most makes and classes of commercial vehicles. Each Rush Truck Center is a warranty service center for the commercial vehicle manufacturers represented at that location and most are also authorized service centers for other manufacturers, including, Caterpillar, Cummins, Eaton and Arvin Meritor. We have more than 1,000 service and body shop bays, including 24 paint booths, throughout our Rush Truck Center network. We also have field service trucks and technicians who make on-site repairs at our customers’ locations.

We perform both warranty and non-warranty service work on commercial vehicles. The cost of warranty work is generally reimbursed by the applicable manufacturer at retail commercial rates. A majority of the service technicians at our Rush Truck Centers have been certified by various vehicle component manufacturers.

As part of our leasing and rental operations, we enter into contracts with customers to provide full-service maintenance on their trucks. We had 825 units under contract maintenance as of December 31, 2010, and 667 units under contract maintenance as of December 31, 2009.

Truck Leasing and Rental. Truck leasing and rental revenues accounted for approximately $67.4 million, or 4.5%, of our total revenues for 2010. At our Rush Truck Leasing locations, we engage in full-service truck leasing under the PacLease and Idealease trade names. Leasing and rental customers contribute to additional parts sales and service work at Rush Truck Centers because most of our leases require service and maintenance for the leased trucks to be performed at our facilities (or at facilities outside our service area, as we direct). Rented trucks are also generally serviced at our facilities. We had 2,984 units in our lease and rental fleet as of December 31, 2010 compared to 2,366 units as of December 31, 2009. Generally, we sell trucks that have been retired from our lease and rental fleet through the used sales operations at our Rush Truck Centers. Historically, we have realized gains on the sale of used lease trucks in excess of the cost of the purchase option contained in our leases or the book value of trucks owned by the Company.

Financial and Insurance Products

We sell, as agent, a complete line of property and casualty insurance to our commercial vehicle customers and other truck owners. Our agency is licensed to sell truck liability, collision and comprehensive, workers’ compensation, cargo, credit life and occupational accident insurance coverage. We serve as sales representatives for a number of leading insurance companies including the Great American Insurance Companies, Sentry Insurance and Hartford Insurance Group. Our renewal rate in 2010 was 80%.

Rush Truck Centers have personnel responsible for arranging third-party financing for our product offerings. We also have licensed insurance agents at a number of our dealerships who arrange insurance for our customers. The sale of financial and insurance products accounted for approximately $7.9 million, or 0.5%, of our total revenue for 2010. Finance and insurance revenues have minimal direct costs and, therefore, contribute a disproportionate share of our operating profits.

New and Used Commercial Vehicle Financing. We arranged customer financing through various commercial lending sources for approximately 24% of our new and used commercial vehicle sales in 2010 and approximately 22% in 2009. Generally, commercial vehicle finance contracts are memorialized through the use of installment contracts, which are secured by the commercial vehicles financed, and require a down payment of 10% to 30% of the selling price of the financed commercial vehicle, with the remaining balance financed over a two to five-year period. The majority of finance contracts are sold to third parties without recourse to the Company. The Company’s recourse liability related to finance contracts sold with recourse to the Company ranges from 5% to 100% of the outstanding amount of each note initiated on behalf of the finance company (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies”). The Company provides an allowance for repossession losses and early repayment penalties.

Sales and Marketing

Our established expansion and acquisition strategy and long history of operations in the commercial vehicle business have resulted in a strong customer base that is diverse in terms of geography, industry and scale of operations. Rush Truck Centers’ customers include owner operators, regional and national truck fleets, corporations and local governments. During 2010, no single customer of our Rush Truck Centers accounted for more than 10% of our total commercial vehicle sales by dollar volume. We generally promote our products and related services through direct customer contact by our sales personnel, advertisements in trade magazines and attendance at industry shows.

We believe that the consistently reliable service received by our customers, our longevity and our geographic diversity have resulted in increased market recognition of the “Rush” brand name and have served to reinforce customer loyalty. In an effort to enhance our name recognition and to communicate the standardized high level of quality products and services provided at our Rush Truck Centers, we implement our “Rush” brand name concept at each of our dealerships.

Facility Management

Personnel. Each Rush Truck Center is typically managed by a general manager who oversees the operations, personnel and the financial performance of the location, subject to the direction of a regional manager and personnel at our corporate office. Additionally, each Rush Truck Center is typically staffed by a sales manager, parts manager, service manager, sales representatives, parts employees, and other service and make-ready employees, as appropriate, given the services offered. The sales staff of each Rush Truck Center is compensated on a salary plus commission basis, with a high percentage of their compensation consisting of commission, while managers receive a combination of salary and performance bonus, with a high percentage of their compensation consisting of the performance bonus. We believe that our employees are among the highest paid in their respective industry, which enables us to attract and retain qualified personnel.

On an annual basis, regional managers work with general managers to prepare detailed monthly profit and loss forecasts based upon historical information and projected trends. A portion of each regional manager’s and general manager’s performance bonus is based upon whether they meet or exceed their operating plans. During the year, general managers regularly review their facility’s progress with their regional manager and senior management and make appropriate adjustments as needed.

We have been successful in retaining our senior management, regional managers and general managers. To promote communication and efficiency in operating standards, regional managers and members of senior management attend company-wide strategy sessions each year. In addition, management personnel attend various industry sponsored leadership and management seminars and receive continuing education on the products we distribute, marketing strategies and management information systems.

Members of senior management and regional managers regularly travel to each Rush Truck Center to provide on-site management and support. Each Rush Truck Center is audited regularly for compliance with corporate policies and procedures. These routine unannounced internal audits, objectively measure dealership performance with respect to corporate expectations in the management and administration of sales, commercial vehicle inventory, parts inventory, parts sales, service sales, body shop sales, corporate policy compliance, human resources compliance, and environmental and safety compliance matters. The Company has instituted succession planning pursuant to which employees in each Rush Truck Center are groomed as assistant managers to assume management responsibilities in existing and future dealerships.

Purchasing and Suppliers. We believe that pricing is an important element of our marketing strategy. Because of our size, our Rush Truck Centers benefit from volume purchases at favorable prices that permit them to achieve a competitive pricing position in the industry. We purchase our commercial vehicle inventory and proprietary parts and accessories directly from the applicable vehicle manufacturer. All other manufacturers’ parts and accessories, including those of Caterpillar, Cummins and other component manufacturers, are purchased through wholesale distributors, which buy such products for resale to the Company and other dealers. Most purchasing commitments are negotiated by personnel at our corporate headquarters. Historically, we have been able to negotiate favorable pricing levels and terms, which enable us to offer competitive prices for our products.

Management Information Systems. We utilize our management information systems to monitor the inventory level of commercial vehicles and parts at each of our dealerships. From information assimilated from management information systems, management has developed a model reflecting historic sales levels of different product lines. This model enables management to identify the appropriate level and combination of inventory and forms the basis of our operating plan. Our management information systems and databases are also used to monitor market conditions and sales information and assess product and expansion strategies.

Information received from manufacturers, industry analysts and industry contacts allows us to determine market share statistics and gross volume sales numbers for our products as well as those of competitors. This information impacts ongoing operations because management remains aware of changes within the markets we service and is able to react accordingly by realigning product lines and by adding new product lines and models.

Distribution and Inventory Management. We utilize a real-time inventory tracking system to maintain a close link between each Rush Truck Center. This link allows for timely and cost-effective sharing of managerial and sales information as well as the prompt transfer of inventory among various locations. The transfer of inventory reduces delays in delivery, helps maximize inventory turns and assists in controlling problems created by overstock and understock situations. We are linked directly to our major suppliers, via real-time communication links for purposes of ordering and inventory management. These automated reordering and communication systems allow us to maintain proper inventory levels and permit us to have inventory delivered to our locations, or directly to customers, typically within 24 hours of an order being placed.

Recent Acquisitions and Disposition

On September 9, 2010, the Company sold the assets of its John Deere construction equipment business, including its Rush Equipment Centers in Houston and Beaumont, Texas, to Doggett Heavy Machinery Services, LLC. The total purchase price for the Rush Equipment Centers was $31.0 million. The Company received cash of $26.2 million at closing and a $4.8 million note receivable to be paid over four years. Before closing, the Company paid liabilities, related to the assets sold, of approximately $14.6 million. The Company recorded a gain on the transaction of $10.1 million. The Construction Equipment segment will no longer be reported as a separate business segment.

On May 24, 2010, the Company acquired certain assets of Lake City Companies, LLC and certain of its subsidiaries and affiliates (collectively, “Lake City International”). Lake City International operated a commercial truck and bus sales, service, parts, finance and leasing business representing multiple brands at five locations in Utah, five locations in Idaho and one location in Oregon. These locations are operating as Rush Truck Centers and offer a combination of International heavy- and medium-duty commercial vehicles, Autocar trucks, Mitsubishi Fuso medium-duty trucks, IC buses and Workhorse chassis in addition to parts, service, body shop, financing and insurance capabilities. Rush Truck Leasing operates Idealease truck rental and leasing franchises at locations in Salt Lake City, Utah, and Boise, Idaho. The transaction, including the real estate, was valued at approximately $70.0 million. The purchase price for the assets of the business was paid in cash and the purchase price for the real estate was partially paid in cash with the remainder financed with long-term debt.

On July 12, 2010, the Company acquired certain assets of Joe Cooper Truck Center LLC, which consisted of a Ford franchise in Oklahoma City, Oklahoma. The newly acquired Ford franchise was added to the Company’s existing dealership in Oklahoma City, Oklahoma. The transaction was valued at approximately $1.2 million, with the purchase price paid in cash.

On October 12, 2010, the Company acquired certain assets of Metro Ford Truck Sales, Inc., which consisted of a Ford and Isuzu commercial vehicle dealership in Dallas, Texas. The Company is operating the facility as a full-service Rush Truck Center offering medium-duty trucks, parts and service. The transaction, including the real estate, was valued at approximately $5.6 million, with the purchase price paid in cash.

See Note 16 of the Notes to Consolidated Financial Statements for a detailed discussion of the allocation of the purchase price of these acquisitions.

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Pending Acquisition” for a description of our pending acquisition of certain assets of Asbury Automotive Atlanta, LLC.

Competition

There is, and will continue to be, significant competition both within our current markets and in new markets we may enter. We anticipate that competition between us and other dealers will continue to increase in our current markets and on a national level based on the following:

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the accessibility of dealership locations;

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the number of dealership locations;

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price, value, quality and design of the products sold; and

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attention to customer service (including technical service).

Our dealerships compete with dealerships representing other manufacturers including commercial vehicles manufactured by Mack, Freightliner, Kenworth, Volvo, and Western Star Truck Holdings, Ltd. We believe that our dealerships are able to compete with manufacturer-owned dealers, independent dealers, independent service centers, parts wholesalers, commercial vehicle wholesalers, rental service companies and industrial auctioneers in distributing our products and providing service because of the following: the overall quality and reputation of the products we sell; “Rush” brand name recognition and reputation for quality service; and our ability to provide comprehensive parts and service support, as well as financing, insurance and other customer services.

Dealership Agreements

Peterbilt. We have entered into nonexclusive dealership agreements with Peterbilt which authorize us to act as a dealer of Peterbilt heavy- and medium-duty trucks. Our Peterbilt areas of responsibility currently encompass areas in the states of Alabama, Arizona, California, Colorado, Florida, New Mexico, North Carolina, Oklahoma, Tennessee and Texas. These dealership agreements currently have terms expiring between April 2011 and July 2013 and impose certain operational obligations and financial requirements upon us and our dealerships. The Company’s dealership agreements with Peterbilt may be terminable by Peterbilt in the event the aggregate voting power of W. Marvin Rush, W.M. “Rusty” Rush, other members of the Rush family and certain executives of the Company decreases below 30%. These agreements also grant Peterbilt rights of first refusal under certain circumstances relating to any sale or transfer of our dealership locations or if certain Rush family members desire to sell more than 100,000 shares of our voting common stock within a 12-month period to anyone other than family members or certain other specified persons. Any termination or non-renewal of these dealership agreements by Peterbilt must follow certain guidelines established by both state and federal legislation designed to protect motor vehicle dealers from arbitrary termination or non-renewal of franchise agreements. The Automobile Dealers Day in Court Act and other similar state laws provide that the termination or non-renewal of a motor vehicle dealership agreement must be done in “good faith” and upon a showing of “good cause” by the manufacturer for such termination or non-renewal, as such terms have been defined by statute and interpreted in case law. Sales of new Peterbilt trucks accounted for approximately 40.5% of our total revenues for 2010.

Other Commercial Vehicle Suppliers. In addition to our dealership agreements with Peterbilt, various Rush Truck Centers have entered into dealership agreements with other commercial vehicle manufacturers including Autocar, Blue Bird, Ford, Hino, IC, International, Isuzu, Mitsubishi and UD, which currently have terms expiring between May 2011 and May 2015. These dealership agreements impose operating requirements upon us and require consent from the affected supplier for sale or transfer of such dealership agreement. Sales of non-Peterbilt commercial vehicles accounted for approximately 9.1% of our total revenues for 2010.

Floor Plan Financing

Trucks. During 2010, we financed substantially all of our new truck inventory and the loan value of our used truck inventory under a wholesale security agreement with General Electric Capital Corporation (“GE Capital”). Interest under the wholesale security agreement was payable monthly and during 2010, the rate varied from LIBOR plus 1.15% to LIBOR plus 1.50% depending on the month-end average aggregate amount outstanding under our GE Capital wholesale security agreement.

On December 31, 2010, we entered into a new $450.0 million credit agreement with GE Capital to replace our wholesale security agreement. The interest rate under the new credit agreement is LIBOR plus 2.95%. As of December 31, 2010, we had approximately $229.9 million outstanding under the credit agreement. GE Capital may terminate this credit agreement without cause upon 120 days notice.

Several truck manufacturers offer floor plan programs with varying interest free finance periods. If the commercial vehicle financed by other manufacturers is not sold within the interest free finance period, the Company transfers the financed commercial vehicle to the GE Capital credit agreement.

Product Warranties

The manufacturers we represent provide retail purchasers of their products with a limited warranty against defects in materials and workmanship, excluding certain specified components that are separately warranted by the suppliers of such components. The Company provides a warranty up to eighteen months on the Company’s branded parts. The Company also provides a one year extended warranty beyond the manufacturer’s warranty on new school buses sold in the State of Texas, as required by state law.

We generally sell used commercial vehicles in “as is” condition without manufacturer’s warranty, although manufacturers sometimes will provide a limited warranty on their used products if such products have been properly reconditioned prior to resale or if the manufacturer’s warranty on such product is transferable and has not expired. We do not provide any warranty on used commercial vehicles.

Trademarks

The Peterbilt, Hino, Isuzu, Ford, International, Blue Bird, IC Bus, Autocar, Fuso and UD trademarks and trade names, which are used in connection with our marketing and sales efforts, are subject to limited licenses included in our dealership agreements with each manufacturer. The licenses are for the same periods as our dealership agreements. These trademarks and trade names are widely recognized and are important in the marketing of our products. Each licensor engages in a continuous program of trademark and trade name protection. We hold registered trademarks from the U.S. Patent and Trademark Office for the names “Rush Enterprises,” “Rush Truck Center,” “Associated Truck Insurance Services,” “Chrome Country” and “Rig Tough.”

Employees

On December 31, 2010, the Company had 3,010 employees. The Company has no contracts or collective bargaining agreements with labor unions and has never experienced work stoppages. The Company considers its relations with its employees to be good.

Seasonality

The Company’s Truck Segment is moderately seasonal. Seasonal effects on new commercial vehicle sales related to the seasonal purchasing patterns of any single customer type are mitigated by the diverse geographic locations of our dealerships and the Company’s diverse customer base, including regional and national fleets, local governments, corporations and owner operators. However, commercial vehicle parts and service operations historically have experienced higher sales volumes in the second and third quarters.

Backlog

On December 31, 2010, the Company’s backlog of commercial vehicle orders was approximately $277.1 million as compared to a backlog of commercial vehicle orders of approximately $110.6 million on December 31, 2009. The Company includes only confirmed orders in its backlog. The delivery time for a custom-ordered truck varies depending on the truck specifications and demand for the particular model ordered, however, the Company expects to fill all of its backlog orders during 2011. The Company sells the majority of its new commercial vehicles by customer special order, with the remainder sold out of inventory. Orders from a number of the Company’s major fleet customers are included in the Company’s backlog as of December 31, 2010.

Environmental Standards and Other Governmental Regulations

The Company is subject to a wide range of federal, state and local environmental laws and regulations, including those governing discharges into the air and water; the operation and removal of underground and aboveground storage tanks; the use, handling, storage and disposal of hazardous substances, petroleum and other materials; and the investigation and remediation of contamination. As with commercial vehicle dealerships generally, and service, parts and body shop operations in particular, our business involves the generation, use, storage, handling and contracting for recycling or disposal of hazardous materials or wastes and other environmentally sensitive materials. The Company has incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

Our operations involving the management of hazardous and nonhazardous materials are subject to the requirements of the federal Resource Conservation and Recovery Act, or RCRA, and comparable state statutes. Pursuant to these laws, federal and state environmental agencies have established approved methods for handling, storage, treatment, transportation and disposal of regulated substances and wastes with which the Company must comply. Our business also involves the operation and use of above ground and underground storage tanks. These storage tanks are subject to periodic testing, containment, upgrading and removal under RCRA and comparable state statutes. Furthermore, investigation or remediation may be necessary in the event of leaks or other discharges from current or former underground or aboveground storage tanks.

The Company may also have liability in connection with materials that were sent to third-party recycling, treatment, or disposal facilities under the federal Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, and comparable state statutes. These statutes impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. Responsible parties under these statutes may include the owner or operator of the site where contamination occurred and companies that disposed or arranged for the disposal of the hazardous substances released at these sites. These responsible parties also may be liable for damages to natural resources. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances or other pollutants into the environment.

The federal Clean Water Act and comparable state statutes prohibit discharges of pollutants into regulated waters without the necessary permits, require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans. Water quality protection programs govern certain discharges from some of our operations. Similarly, the federal Clean Air Act and comparable state statutes regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, the U.S. Environmental Protection Agency, or EPA, has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants from specified sources.

The EPA and the U.S. Department of Transportation (DOT) recently announced the first national standards to reduce greenhouse gas (GHG) emissions and improve fuel efficiency of heavy-duty trucks and buses. This comprehensive national program is projected to reduce GHG emissions by about 250 million metric tons and save 500 million barrels of oil over the lives of the vehicles produced within the program’s first five years.

The EPA and DOT’s National Highway Traffic Safety Administration are proposing new standards for three categories of heavy trucks: combination tractors (the main power unit portion of a tractor-trailer combined vehicle), heavy-duty pickups and vans, and vocational vehicles. The categories were established to address specific challenges for manufacturers in each area. For combination tractors, the agencies are proposing engine and vehicle standards that begin in the 2014 model year and achieve up to a 20 percent reduction in carbon dioxide (CO2) emissions and fuel consumption by 2018 model year.

For heavy-duty pickup trucks and vans, the agencies are proposing separate gasoline and diesel truck standards, which phase in starting in the 2014 model year and achieve up to a 10 percent reduction for gasoline vehicles and 15 percent reduction for diesel vehicles by 2018 model year (12 and 17 percent respectively if accounting for air conditioning leakage). Lastly, for vocational vehicles, the agencies are proposing engine and vehicle standards starting in the 2014 model year which would achieve up to a 10 percent reduction in fuel consumption and CO2 emissions by 2018 model year.

It is not possible at this time to accurately predict how the foregoing proposed standards, future legislation or other new regulations that may be adopted to address greenhouse gas emissions will impact our business. Any regulations will likely result in increased compliance costs, additional operating restrictions or changes in demand for our products and services, which could have a material adverse effect on our business, financial condition and results of operation.

The Company believes that it does not currently have any material environmental liabilities and that compliance with environmental laws and regulations will not, individually or in the aggregate, have a material adverse effect on our results of operations, financial condition or cash flows. However, soil and groundwater contamination is known to exist at some of our current properties. Further, environmental laws and regulations are complex and subject to change. In addition, in connection with acquisitions, it is possible that the Company will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. In connection with our dispositions, or prior dispositions made by companies acquired, the Company may retain exposure for environmental costs and liabilities, some of which may be material. Compliance with current or amended, or new or more stringent, laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us, and those expenditures could be material.

It is not possible at this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business. Any such future laws and regulations could result in increased compliance costs, additional operating restrictions or changes in demand for our products and services which could have a material adverse effect on our business, financial condition and results of operation.

Item 1A.		Risk Factors

An investment in our common stock is subject to risks inherent to our business. In addition to the other information contained in this Form 10-K, we recommend that you carefully consider the following risk factors in evaluating our business. If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could decline significantly, and you could lose all or part of your investment. This report is qualified in its entirety by these risk factors.

Risks Related to Our Business

We are substantially dependent upon PACCAR for the supply of Peterbilt trucks and parts, the sale of which generates the majority of our revenues.

We currently operate as a dealer of Peterbilt trucks and parts pursuant to dealership agreements with Peterbilt, a division of PACCAR. During 2010, a significant portion of our revenues resulted from sales of trucks purchased from Peterbilt and parts purchased from PACCAR. Due to our dependence on PACCAR and Peterbilt, we believe that the long-term success of our Rush Truck Centers depends, in large part, on the following:

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maintaining our relationship with PACCAR;

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the manufacture and delivery of competitively-priced, high quality Peterbilt trucks and parts by PACCAR in quantities sufficient to meet our requirements;

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the overall success of PACCAR and Peterbilt;

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PACCAR’s continuation of its Peterbilt division;

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the goodwill associated with the Peterbilt trademark, which can be adversely affected by decisions made by PACCAR and the owners of other Peterbilt dealerships; and

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PACCAR and Peterbilt’s ability to offer vehicles that meet federal and state emissions requirements.

We have no control over the management or operation of PACCAR or Peterbilt dealerships that we do not own.

Our results of operations and financial condition have been adversely affected by the conditions in the credit markets and unfavorable economic conditions in the United States.

Our business and operating results have been adversely affected by the unfavorable economic conditions in the United States, including the turbulence in the credit markets. In the commercial vehicle finance markets in recent years, tight credit conditions resulted in a decrease in the availability of commercial vehicle loans and led to more stringent lending restrictions. The economic conditions in the United States in recent years adversely impacted general demand for new and used commercial vehicles. As a result, our new and used commercial vehicle sales and margins continue to be adversely impacted.

Market conditions could also make it more difficult for us to raise additional capital or obtain additional financing to fund capital expenditure projects, refinance existing debt or acquisitions. Additional funds may not be available if needed and to the extent required or, if available, on acceptable terms. If we cannot raise necessary additional funds on acceptable terms, there could be an adverse impact on our business and operations. We also may not be able to fund expansion, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements.

Our growth is subject to a number of economic risks.

New and used commercial vehicle retail sales tend to experience periods of decline characterized by oversupply and weak demand. The commercial vehicle retail industries may experience sustained periods of decline in commercial vehicle sales in the future. Any decline or change of this type could materially affect our business, financial condition and results of operations.

As previously discussed, our business is subject to the adverse economic conditions present in the United States in recent years, including, without limitation, decreased levels of business activity, decreased freight demand, decreased construction activity, interest rate volatility, and limited credit availability. These adverse economic conditions could continue to materially affect our business, financial condition and results of operations.

Adverse regional economic and competitive conditions in the geographic markets in which we operate could materially affect our business, financial condition and results of operations. Our new commercial vehicle sales volume therefore may differ from industry sales fluctuations.

Economic conditions and the other factors described above also may materially adversely impact our sales of finance and insurance products, and parts and repair services.

We may be required to obtain additional financing to maintain adequate inventory levels.

Our business requires inventories held for sale to be maintained at dealer locations in order to facilitate immediate sales to customers on demand. We generally purchase inventories with the assistance of floor plan financing agreements. Our floor plan financing agreements are with companies that have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients. Additionally, our floor plan providers may have exposure to financial institutions in the form of equity investments and unsecured debt instruments. In the event that our floor plan financing becomes insufficient to satisfy our future requirements or our floor plan providers are unable to continue to extend credit under our floor plan agreements, we would need to obtain similar financing from other sources. There is no assurance that such additional floor plan financing or alternate financing could be obtained or, if obtained, that it will be on commercially reasonable terms.

Changes in interest rates could have a material adverse effect on our profitability.

Our primary floor plan financing agreements and some of our other debt are subject to variable interest rates. Therefore, our interest expense would rise with any increase in interest rates. A rise in interest rates may also have the effect of depressing demand in the interest rate sensitive aspects of our business, particularly new and used commercial vehicle sales, because many of our customers finance these large purchases. As a result, a rise in interest rates may have the effect of simultaneously increasing our costs and reducing our revenues, which could materially affect our business, financial condition and results of operations. See “Quantitative and Qualitative Disclosures about Market Risk” for a discussion regarding our interest rate sensitivity.

Our dealership agreements may be terminable upon a change of control and we cannot control whether our controlling shareholder and management maintain their current positions.

We have entered into nonexclusive dealership agreements with Peterbilt that authorize us to act as a dealer of Peterbilt trucks. Peterbilt may terminate our dealership agreements in the event of a change of control of the Company or if we violate any number of provisions in the dealership agreements. Under our Peterbilt dealership agreements, a change of control occurs if (i) with respect to the election of directors, the aggregate voting power held by W. Marvin Rush, W. M. “Rusty” Rush, W. Marvin Rush’s family members and other executives of the Company decreases below 30% (such persons currently control 34.1% of the aggregate voting power with respect to the election of directors); or (ii) any person or entity other than W. Marvin Rush, W. M. “Rusty” Rush and other Rush executives or any person or entity who has been approved in writing by PACCAR, owns common stock with a greater percentage of the voting power with respect to the election of our directors than W. Marvin Rush and W. M. “Rusty” Rush and other executives of the Company, in the aggregate, or any person other than W. Marvin Rush, W. M. “Rusty” Rush, Robin M. Rush or any person who has been approved in writing by PACCAR holds the office of Chairman of the Board, President or Chief Executive Officer of the Company. We have no control over the transfer or disposition by W. Marvin Rush or by his estate of his common stock. If W. Marvin Rush were to sell his Class B common stock or bequest his Class B common stock to nonfamily members or if his estate is required to liquidate his Class B common stock to pay estate taxes or otherwise, the change of control provisions of the Peterbilt dealership agreements may be triggered and cause us to lose our critical right to sell Peterbilt products. Some of our medium-duty truck dealership agreements are also terminable if the aggregate voting power of W. Marvin Rush and his family members falls below certain percentages, typically 25%. If our dealership agreements with any manufacturer are terminated, we will lose the right to purchase such manufacturer’s products, which would have a material adverse effect on our operations, revenues and profitability.

If state dealer laws are repealed or weakened, our dealerships will be more susceptible to termination, nonrenewal or renegotiation of their dealership agreements.

Our truck dealership agreements impose certain operational obligations and financial requirements on us. State dealer laws generally provide that a manufacturer may not terminate or refuse to renew a dealership agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or nonrenewal. Manufacturers’ lobbying efforts may lead to the repeal or revision of state motor vehicle dealer laws. If motor vehicle dealer laws are repealed in the states in which we operate dealerships, our manufacturers may be able to terminate our vehicle dealership agreements without providing advance notice, an opportunity to cure or a showing of good cause. Without the protection of state dealer laws, or if such laws are weakened, we will be subject to higher risk of termination or non-renewal of our vehicle dealership agreements. Termination or non-renewal of our vehicle dealership agreements could have a material adverse effect on our operations, revenues and profitability.

Our dealership agreements have relatively short terms which could result in non-renewal or imposition of less favorable terms upon renewal.

Our Peterbilt dealership agreements have current terms expiring between April 2011 and July 2013. Our International dealership agreements have current terms expiring May 2013 and May 2015. Our dealership agreements with Autocar, Mitsubishi, Hino, UD, Ford, Isuzu, Diamond, Elkhart, Blue Bird, IC Bus and Workhorse for the sale of medium-duty commercial vehicles have current terms expiring between May 2011 and May 2015. Upon expiration of each agreement, we must negotiate a renewal. In many states, state dealer franchise laws restrict the manufacturer’s ability to refuse to renew dealership agreements or to impose new terms upon renewal. To the extent such laws do permit non-renewal or imposition of new terms, the relatively short terms will give the manufacturers the opportunity to exercise such rights. Any non-renewal or imposition of less favorable terms upon renewal could have an adverse impact on our business.

We depend on relationships with suppliers for sales incentives, discounts and similar programs which are material to our operations.

We depend on suppliers for sales incentives, discounts, warranties and other programs that are intended to promote our use of their components. Most of the incentives and discounts are individually negotiated and not always the same as those made available to our competitors. These incentives and discounts are material to our operations. A reduction or discontinuation of a component supplier’s incentive program could have a material adverse effect on our profitability.

Substantial competition may affect our profitability.

We face vigorous competition for customers and for suitable dealership locations. We compete with a large number of independent dealers, factory-owned dealers, and independent service centers. There is significant competition both within the markets we currently serve and in markets that we may enter. Moreover, our dealership agreements generally do not contractually provide us with exclusive dealerships in any territory. Manufacturers we represent could elect to create additional dealers in our market areas in the future, subject to restrictions imposed by state laws. While dealership agreements typically restrict dealers from operating sales or service facilities outside their assigned territory, such agreements do not restrict fleet or other sales or marketing activity outside the assigned territory. Accordingly, we engage in fleet sales and other marketing activities outside our assigned territories and other dealers engage in similar activities within our territories. Dealer competition continues to increase and is affected by a number of factors including the accessibility of dealership locations, the number of dealership locations, product pricing, product value, product quality, product design and customer service (including technical service). We anticipate that we will continue to face strong competition in the future.

We could incur substantial business interruptions during our dealer management system conversion.

We will continue to implement SAP enterprise software and a new SAP dealership management system throughout the organization during 2011. The estimated cost of the implementation is approximately $39.0 million. SAP’s dealership management system will become our sole dealership management system for our Rush Truck Centers. We currently operate on a KARMAK Legend Enterprise Solution and our Rush Truck Centers operate on KARMAK Legend dealer management system. By implementing SAP, we believe that we will be able to standardize operational processes throughout our network of Rush Truck Centers. However, if our implementation of SAP is unsuccessful, we could incur substantial business interruptions, including the inability to perform routine business transactions, which could have a significant impact on our financial performance.

If we lose key personnel or are unable to attract additional qualified personnel, our business could be adversely affected because we rely on the industry knowledge and relationships of our key personnel.

We believe that our success depends significantly upon the efforts and abilities of our executive management and key employees. Additionally, our business is dependent upon our ability to continue to attract and retain qualified personnel, such as executive officers, managers and dealership personnel. The loss of the services of one or more members of our senior management team could have a material adverse effect on us and materially impair the efficiency and productivity of our operations. In addition, the loss of any of our key employees or the failure to attract additional qualified executive officers, managers and dealership personnel could have a material adverse effect on our business and may materially impact the ability of our dealerships to conduct their operations in accordance with our business strategy.

Natural disasters and adverse weather events can disrupt our business.

Our dealerships are concentrated in states and regions in the United States in which actual or threatened natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods and hail storms) may disrupt our operations, which may adversely impact our business, results of operations, financial condition and cash flows. In addition to business interruption, our business is subject to substantial risk of property loss due to the significant concentration of property at dealership locations. Although we have, subject to certain limitations and exclusions, substantial insurance, we may be exposed to uninsured or underinsured losses that could have a material adverse effect on our business, financial condition, results of operations or cash flows.

The dollar amount of our backlog, as stated at any given time, is not necessarily indicative of our future earnings.

As of December 31, 2010, our backlog of new commercial vehicle orders was approximately $277.1 million. Our backlog is determined quarterly by multiplying the number of new commercial vehicles for each particular type of commercial vehicle ordered by a customer at our Rush Truck Centers by the recent average selling price for that type of commercial vehicle. We only include confirmed orders in our backlog. However, such orders are subject to cancellation. In the event of order cancellation, we have no contractual right to the total revenues reflected in our backlog.

Reductions in backlog due to cancellation by a customer or for other reasons adversely affect, potentially to a material extent, the revenue and profit we actually receive from orders projected in our backlog. If we were to experience significant cancellations of orders in our backlog, our financial condition could be adversely affected.

Our dealerships are subject to federal, state and local environmental regulations that may result in claims and liabilities, which could be material.

We are subject to a wide range of federal, state and local environmental laws and regulations, including those governing discharges into the air and water; the operation and removal of underground and aboveground storage tanks; the use, handling, storage and disposal of hazardous substances, petroleum and other materials; and the investigation and remediation of contamination. As with commercial vehicle dealerships generally, and service, parts and body shop operations in particular, our business involves the generation, use, storage, handling and contracting for recycling or disposal of hazardous materials or wastes and other environmentally sensitive materials. Any non-compliance with these laws and regulations could result in significant fines, penalties and remediation costs which could adversely affect our results of operations, financial condition or cash flows.

We may also have liability in connection with materials that were sent to third-party recycling, treatment, or disposal facilities under federal and state statutes. In that case, laws and regulations may make us responsible for liability relating to the investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. In connection with our acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. In connection with dispositions of businesses, or dispositions previously made by companies we acquire, we may retain exposure for environmental costs and liabilities, some of which may be material.

Further, environmental laws and regulations are complex and subject to change. Compliance with current or amended, or new or more stringent, laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us which could materially adversely affect our results of operations, financial condition or cash flows.

We are dependent on the ongoing success of the manufacturers we represent and adverse conditions affecting the manufacturers we represent may negatively impact our revenues and profitability.

The success of our dealerships is dependent on the manufacturers represented at such dealerships in several ways. Our ability to sell new vehicles and replacement parts is dependent on the ability of the manufacturers we represent to produce and deliver new vehicles and replacement parts to our dealerships. Additionally, our dealerships perform warranty work for vehicles under manufacturer product warranties, which are billed to the appropriate vehicle manufacturer or component supplier as opposed to invoicing the store customer. We generally have significant receivables from manufacturers for warranty and service work performed for customers. In addition, we rely on manufacturers to varying extents for product training, marketing materials, and other items for our stores. Our business, results of operations, and financial condition could be materially adversely affected as a result of any event that has a material adverse effect on the manufacturers we represent.

The manufacturers we represent may be adversely impacted by economic downturns, significant declines in the sales of their new vehicles, labor strikes or similar disruptions (including within their major suppliers), rising raw materials costs, rising employee benefit costs, adverse publicity that may reduce consumer demand for their products (including due to bankruptcy), product defects, vehicle recall campaigns, litigation, poor product mix or unappealing vehicle design, governmental laws and regulations, or other adverse events. Our results of operations, financial condition or cash flows could be adversely affected if one or more of the manufacturers we represent are impacted by any of the foregoing adverse events.

Actions taken in response to continued operational losses by manufacturers we represent, including bankruptcy or reorganizations, could have a material adverse effect on our sales volumes and profitability. In addition, such losses or reorganizations could lead to the impairment of one or more of our franchise rights, inventories, fixed assets and other related assets, which in turn could have a material adverse effect on our financial condition and results of operations. For example, during the second quarter of 2009, General Motors made the decision to terminate its medium-duty GMC truck production and wind-down the Company’s medium-duty GMC truck franchises, which forced the Company to take a significant pre-tax asset impairment charge in the second quarter of 2009. Actions taken in response to continued operational losses by manufacturers we represent, including bankruptcy or reorganizations, could also eliminate or reduce such manufacturers’ indemnification obligations to our dealerships, which could increase our risk in products liability actions.

Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in increased costs and reduced demand for our products and services.

The EPA and the DOT’s National Highway Traffic Safety Administration (“NHTSA”) recently announced proposed rules to reduce greenhouse gas emissions and improve fuel efficiency of medium and heavy-duty vehicles. The EPA and NHTSA are attempting to create a “heavy-duty national program,” designed to reduce oil consumption and address global climate change by each proposing complementary standards to reduce fuel use and greenhouse gas emissions from on-highway transportation sources. The emissions and fuel consumption standards in the proposed rules would phase in with increasing stringency in each model year from 2014 to 2018. The proposed rules are likely to increase the production costs of the manufacturers we represent. Our manufacturers are likely to pass such costs on to us, which could increase the cost of the new vehicles we sell and, accordingly, reduce demand for such products. Increased costs and reduced demand could materially adversely affect our ability to sell new vehicles, which would materially adversely affect our business, results of operations, and financial condition.

Negative conditions in global credit markets may impair our investments in auction rate securities.

Auction rate securities (“ARS”) are long-term debt instruments with interest rates that reset through periodic short-term auctions. Holders of ARS can either sell into the auction, or bid, based on a desired interest rate, or hold and accept the reset rate. If there are insufficient buyers, then the auction fails and holders are unable to liquidate their investment through the auction. A failed auction is not a default of the debt instrument, but does set a new interest rate in accordance with the original terms of the debt instrument. The result of a failed auction is that the ARS continues to pay interest in accordance with its terms; however, liquidity for holders is limited until there is a successful auction or until such time as another market for ARS develops. ARS are generally callable at any time by the issuer. Auctions continue to be held as scheduled until the ARS matures or until it is called.

As a result of the conditions in the global credit markets, we have been unable to liquidate our holdings of certain ARS because the amount of securities submitted for sale has exceeded the amount of purchase orders for such securities and the auctions failed. As of December 31, 2010, the Company held approximately $7.6 million in ARS. We continue to earn interest on these investments at the contractual rate. In the event we need to access these funds, we will not be able to do so until a future auction is successful, the issuer redeems the securities, a buyer is found outside of the auction process or the securities mature. If these ARS are unable to successfully clear at future auctions or issuers do not redeem the securities, we may be required to adjust the carrying value of the securities and record an impairment charge. If we determine that the fair value of these ARS is temporarily impaired, we would record a temporary impairment within other comprehensive income, a component of stockholders’ equity. If it is determined that the fair value of these securities is other than temporarily impaired, we would recognize the credit loss portion of the other than temporary impairment in earnings, which could materially adversely impact our results of operations and financial condition. Any noncredit loss would be recognized in other comprehensive income. For further discussion of the risks related to our auction rate securities, see Note 9 — Financial Instruments and Fair Value of the Notes to Consolidated Financial Statements and Item 7A — Quantitative and Qualitative Disclosures about Market Risk.

An impairment in the carrying value of goodwill and other indefinite-lived intangible assets could negatively affect our operating results.

We have a substantial amount of goodwill on our balance sheet as a result of acquisitions we have completed. Approximately 98% of these intangibles are concentrated in our Truck Segment. The carrying value of goodwill represents the fair value of an acquired business in excess of identifiable assets and liabilities as of the acquisition date. Goodwill is not amortized, but instead is evaluated for impairment at least annually, or more frequently if potential interim indicators exist that could result in impairment. In testing for impairment, if the carrying value of a reporting unit exceeds its current fair value as determined based on the discounted future cash flows of the reporting unit, the goodwill is considered impaired and is reduced to fair value via a non-cash charge to earnings. Events and conditions that could result in impairment include a prolonged weak economic recovery, adverse changes in the regulatory environment, any matters that impact manufacturers’ ability to provide trucks to us, issues with our franchise rights, or other factors leading to reductions in expected long-term sales or profitability. Determination of the fair value of a reporting unit includes developing estimates that are highly subjective and incorporate calculations that are sensitive to minor changes in underlying assumptions. Management’s assumptions change as more information becomes available. Changes in these assumptions could result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates — Goodwill” for more information regarding the potential impact of changes in assumptions.

Risks Related to Our Common Stock

We are controlled by a single shareholder and his affiliates.

W. Marvin Rush and W. M. “Rusty” Rush own approximately 0.32% of our issued and outstanding shares of Class A common stock and 38.4% of our issued and outstanding Class B common stock. W. Marvin Rush and W. M. “Rusty” Rush collectively control more than 34.1% of the aggregate voting power of our outstanding shares and voting power which is superior to that of any other person or group. The interests of W. Marvin Rush and W.M. “Rusty” Rush may not be consistent with your interests as a shareholder. As a result of such ownership, W. Marvin Rush and W. M. “Rusty” Rush have the power to effectively control the Company, including the election of directors, the determination of matters requiring shareholder approval and other matters pertaining to corporate governance.

The Class A common stock has limited voting power.

Each share of Class A common stock ranks substantially equal to each share of Class B common stock with respect to receipt of any dividends or distributions declared on shares of common stock and the right to receive proceeds on liquidation or dissolution of us after payment of our indebtedness and liquidation preference payments to holders of any preferred shares. However, holders of Class A common stock have 1/20th of one vote per share on all matters requiring a shareholder vote, while holders of Class B common stock have one full vote per share.

Our dealership agreements could discourage another company from acquiring us and impede our ability to issue additional stock to raise capital or as consideration for future acquisitions.

A number of our dealership agreements impose ownership requirements on W. Marvin Rush, W.M. “Rusty” Rush and other officers of the Company and restrictions on the sale or transfer of the underlying franchises. These ownership requirements and restrictions may prevent or deter prospective acquirers from acquiring control of us and, therefore, may adversely impact the value of our common stock. For example, under the Peterbilt dealership agreements, except as may be otherwise approved from time to time by Peterbilt, W. Marvin Rush, W. M. “Rusty” Rush, W. Marvin Rush’s family members and other of our executives, in the aggregate, are required to retain control of at least 30% of the aggregate voting power of our outstanding shares and voting power equal or superior to that of any other person or group.

In addition, W. Marvin Rush and members of his immediate family have granted Peterbilt a right of first refusal to purchase their respective shares of common stock in the event that any of such individuals desire to transfer in excess of 100,000 shares in any 12-month period to any person other than an immediate family member, an associate or a Dealer Principal (as defined in the Peterbilt dealership agreements). This right of first refusal, the number of shares owned by W. Marvin Rush and W.M. “Rusty” Rush and the requirement in our dealership agreements that certain officers of the Company and Rush family members retain a controlling interest in us, combined with the ability of the Board of Directors to issue shares of preferred stock without further vote or action by the shareholders, may discourage, delay or prevent a change in control without further action by our shareholders, which could adversely affect the market price of our common stock or prevent or delay a merger or acquisition that our shareholders may consider favorable. We do not have the right to waive the right of first refusal or the terms of its dealership agreements in order to accept a favorable offer.

Actions by our shareholders or prospective shareholders that would violate any of the above restrictions on our dealership agreements are generally outside our control. If we are unable to renegotiate these restrictions, we may be forced to terminate or sell one or more of our dealerships, which could have a material adverse effect on us. These restrictions may also inhibit our ability to raise required capital or to issue our stock as consideration for future acquisitions.

Our Class B common stock has a low average daily trading volume. As a result, sales of our Class B common stock could cause the market price of our Class B common stock to drop, and it may be difficult for a stockholder to liquidate its position in our Class B common stock quickly without adversely affecting the market price of such shares.

The market price of our Class B common stock has historically been lower than the market price of our Class A common stock. The volume of trading in our Class B common stock varies greatly and may often be light. As of December 31, 2010, the three-month average daily trading volume of our Class B common stock was approximately 9,210 shares, with several days having a trading volume below 1,000 shares. W. Marvin Rush, our Chairman, owns approximately 38.4% of our Class B common stock. If any large shareholder, including W. Marvin Rush, were to begin selling shares in the market rather than holding such shares over a longer term, the added available supply of shares could cause the market price of our Class B common stock to drop. In addition, the lack of a robust resale market may require a shareholder to sell a large number of shares of our Class B common stock in increments over time to mitigate any adverse impact of the sales on the market price of our Class B common stock.

Item 1B.		Unresolved Staff Comments

None

Item 2.		Properties

The Company’s corporate headquarters are located in New Braunfels, Texas. As of December 2010, the Company also owns or leases numerous facilities used in our operations in the following states: Alabama, Arizona, California, Colorado, Florida, Georgia, Idaho, New Mexico, North Carolina, Oklahoma, Oregon, Tennessee, Texas and Utah. A Rush Truck Center may be comprised of one or more locations, generally in close proximity, in the same metropolitan area. These facilities consist primarily of office space, display lots, service facilities and parking lots.

The Company’s truck leasing operations lease additional space in Phoenix, Arizona, Pico Rivera and Fontana, California, Gallup, New Mexico and Orlando, Florida.

The Company’s insurance agency leases space in San Antonio, Texas, Winter Garden, Florida, Austin, Texas, Laguna Niguel and Newport Beach, California, Clermont, Florida and Norman, Oklahoma.

The Company leases a hangar in New Braunfels, Texas for the corporate aircraft. The Company also owns and operates a guest ranch of approximately 9,500 acres near Cotulla, Texas. The Company uses the ranch for client development purposes and sells hunting trips on the ranch.

Item 3.		Legal Proceedings

From time to time, we are involved in litigation arising out of the Company’s operations in the ordinary course of business. We maintain 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. We believe that there are no claims or litigation pending, the outcome of which could have a material adverse effect on the Company’s 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 results of operations for the fiscal period in which such resolution occurred.

PART II

Item 5.		Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

Our common stock trades on The NASDAQ Global Select Market^SM under the symbols RUSHA and RUSHB.

The following table sets forth the high and low sales prices for the Class A common stock and Class B common stock for the fiscal periods indicated and as quoted on The NASDAQ Global Select Market^SM.

		2010								2009
		High				Low				High				Low
Class A Common Stock
First Quarter		$	13.34			$	10.67			$	10.80			$	6.00
Second Quarter			16.94				13.21				14.91				8.27
Third Quarter			15.59				12.40				14.88				10.16
Fourth Quarter			21.22				14.21				13.04				10.24
Class B Common Stock
First Quarter		$	12.30			$	9.17			$	10.08			$	5.55
Second Quarter			14.84				10.91				12.84				7.44
Third Quarter			14.04				10.45				12.71				8.65
Fourth Quarter			20.21				12.80				10.93				8.41

As of March 2, 2011, there were approximately 39 record holders of the Class A common stock and approximately 47 record holders of the Class B common stock.

The Company did not pay dividends during the fiscal year ended December 31, 2010, or the fiscal year ended December 31, 2009. The Board of Directors intends to retain any earnings of the Company to support operations and to finance expansion and does not intend to pay cash dividends in the foreseeable future. Any future determination as to the payment of dividends will be at the discretion of the Board of Directors of the Company and will depend on the Company’s financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

The Company has not sold any securities in the last three years that were not registered under the Securities Act.

The Company did not repurchase any shares of its Class A Common Stock or Class B Common Stock during the fourth quarter of 2010.

														Maximum Number (or
										Total Number of				Approximate Dollar
										Shares Purchased				Value) of Shares that
		Total Number				Average Price				as Part of Publicly				May Yet Be Purchased
		of Shares				Paid Per				Announced Plans				Under the Plans or
Period		Purchased				Share				or Programs				Programs (1)
October 1 – 31, 2010			—			$	0.00				—				—
November 1 – 6, 2010			—				0.00				—				—
4th Quarter Total			—			$	0.00				—				—

Information regarding the Company’s equity compensation plans is incorporated by reference from Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters,” of this annual report on Form 10-K, and should be considered an integral part of this Item 5.

Item 6.		Selected Financial Data

The information below was derived from the audited consolidated financial statements included in this report and reports we have previously filed with the SEC. This information should be read together with those consolidated financial statements and the notes to those consolidated financial statements. These historical results are not necessarily indicative of the results to be expected in the future. The selected financial data presented below may not be comparable between periods in all material respects or indicative of the Company’s future financial position or results of operations due primarily to acquisitions and discontinued operations which occurred during the periods presented. See Note 16 to the Company’s Consolidated Financial Statements for a discussion of such acquisitions. The selected financial data presented below should be read in conjunction with the Company’s other financial information included elsewhere herein.

		Year Ended December 31,
		2010				2009				2008				2007				2006
		(in thousands, except per share amounts)
SUMMARY OF INCOME STATEMENT DATA
Revenues
New and used commercial vehicle sales		$	926,584			$	738,705			$	1,041,189			$	1,393,253			$	1,780,418
Parts and service sales			489,259				395,133				457,669				459,985				424,766
Lease and rental			67,423				53,710				54,813				52,103				41,776
Finance and insurance			7,922				7,468				11,801				20,921				18,453
Other			6,739				5,437				5,721				7,387				7,294
Total revenues			1,497,927				1,200,453				1,571,193				1,933,649				2,272,707
Cost of products sold			1,213,037				984,812				1,291,001				1,600,270				1,936,164
Gross profit			284,890				215,641				280,192				333,379				336,543
Selling, general and administrative			227,467				192,296				218,775				231,877				220,704
Depreciation and amortization			15,720				15,890				15,273				14,377				12,522
Gain on sale of assets			(36	)			162				128				199				5
Operating income			41,667				7,617				46,272				87,324				103,322
Interest expense, net			5,363				5,695				7,230				14,049				14,888
Income from continuing operations before income taxes			36,304				1,922				39,042				73,275				88,434
Provision (benefit) for income taxes			11,737				(3,173	)			13,864				26,984				33,079
Income from continuing operations			24,567				5,095				25,178				46,291				55,355
Income from discontinued operations, net of taxes			6,715				789				3,687				5,201				3,431
Net income		$	31,282			$	5,884			$	28,865			$	51,492			$	58,786
Earnings per common share — Basic:
Income from continuing operations		$	0.66			$	0.14			$	0.66			$	1.22			$	1.48
Net income		$	0.84			$	0.16			$	0.76			$	1.35			$	1.57
Earnings per common share — Diluted:
Income from continuing operations		$	0.64			$	0.14			$	0.65			$	1.19			$	1.46
Net income		$	0.82			$	0.16			$	0.75			$	1.33			$	1.55
Weighted average shares outstanding:
Basic			37,307				37,066				38,089				38,059				37,476
Diluted			38,218				37,597				38,587				38,746				37,890

		Year Ended December 31,
		2010				2009				2008				2007				2006
OPERATING DATA
Unit vehicle sales —
New vehicles			7,680				6,615				9,289				12,712				16,492
Used vehicles			3,461				2,875				3,234				4,101				4,005
Total unit vehicles sales			11,141				9,490				12,523				16,813				20,497
Truck lease and rental units (including units under contract maintenance)			3,809				3,033				2,570				2,404				2,345

		December 31,
		2010				2009				2008				2007				2006
		(in thousands)
BALANCE SHEET DATA
Working capital		$	143,778			$	164,165			$	177,117			$	197,805			$	156,297
Inventories			321,933				252,219				343,032				345,568				470,705
Assets held for sale			—				22,719				24,479				25,881				18,956
Total assets			1,167,933				977,297				1,056,790				1,031,591				1,128,410
Floor plan notes payable			237,810				189,256				282,702				273,653				446,354
Long-term debt, including current portion			252,129				209,502				209,677				198,945				192,124
Capital lease obligations, including current portion			42,202				34,444				14,820				17,543				17,732
Shareholders’ equity			464,919				426,225				416,041				399,577				339,608

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Despite another year of weak truck sales, 2010 was a very significant year for the Company. The Company matched its record high annual absorption rate of 105.5% — previously achieved in 2008, expanded its network of Rush Truck Centers, established a new Navistar Division, extended the breadth of our product offerings in existing areas of responsibility and ended the year in a strong financial position.

During the spring of 2010, the Company’s parts, service and body shop business began accelerating from the depressed levels experienced throughout 2009, and continued to accelerate to record high levels at the end of the year. Parts, service and body shop revenues were up 23.8% in 2010 compared to 2009, primarily due to increased maintenance and repair on aging vehicles that were put back into service during the year as well as significant increases in oilfield services activity in the south central U.S. The Company expects parts, service and body shop operations to remain strong in 2011.

The Company completed the acquisition of the assets of Lake City International which added 11 International dealership locations in Utah, Idaho and Oregon. The Company opened a new flagship facility in Oklahoma City, replacing its existing Peterbilt and Hino dealership location there and added Isuzu and Ford commercial truck franchises to the newly opened location. The Company also added a Ford and Isuzu commercial truck dealership in Dallas, Texas and Isuzu commercial truck franchises to its Sealy, Texas and Orlando, Florida dealerships. Investment in the existing Rush Truck Centers network and the addition of medium-duty franchises allows the Company to better serve customers in its existing markets with more service capabilities and a broader medium-duty vehicle offering.

The Company is encouraged by the continuing improvement in Class 8 and medium-duty truck orders during the past several months. While U.S. Class 8 order intake has improved for three consecutive months, the Company does not expect retail sales of commercial vehicles to substantially increase until later in 2011, causing the new commercial vehicle sales market to remain competitive and challenging throughout the first half of the year. A.C.T. Research Co., LLC (“A.C.T. Research”), a truck industry data and forecasting service provider, currently predicts 2011 U.S. Class 8 truck sales to reach 179,000 units, up from 110,109 units sold in 2010. A.C.T. Research currently predicts U.S. Class 4-7 retail sales in 2011 to be 128,300 units, up from 117,572 units in 2010. If economic conditions continue to improve, the Company expects that activity will increase in automotive and capital goods manufacturing, as well as residential and commercial construction, which should result in strong truck sales markets in 2012 and 2013.

The Company earns federal income tax credits on the sale of alternative fuel vehicles to tax-exempt entities. These tax credits are reflected as tax benefits in the Company’s Consolidated Statements of Income. A portion of these tax credits are passed back to the tax-exempt customer and are reflected as SG&A expense to the Company in the quarter in which the commercial vehicles are sold. These alternative fuel tax credits and the amount passed back to the customers are directly attributable to the sale of a commercial vehicle. Accordingly, the Company believes the tax credits and the amounts passed back to customers should be considered operating items when analyzing the financial performance of the Company. The Company believes its history of serving municipalities and other tax-exempt customers that cannot claim these federal tax credits, its ability to utilize tax credits and pass back savings to these tax-exempt customers, and its position as a leading dealer of alternative fuel vehicles provide the Company with a distinct advantage over its competition when offering alternative fuel vehicles to tax-exempt entities.

Pending Acquisition

The Company has entered into agreements to purchase certain assets of Asbury Automotive Atlanta, LLC, a subsidiary of Asbury Automotive Group, Inc. (NYSE^®: ABG), which operates commercial truck and bus dealerships representing International, Peterbilt, Isuzu, Hino, UD, IC Bus, and Workhorse in Atlanta, Doraville and Kennesaw, Georgia and a collision center in Atlanta under the “Nalley Motor Trucks” name. Peterbilt exercised its statutory right of first refusal to acquire the Peterbilt assets and the Kennesaw location that are subject to the asset purchase agreement between Asbury Automotive Atlanta, LLC and the Company. The proposed acquisition would expand the Company’s contiguous network of Rush Truck Centers in the southeast and would result in the Company operating 65 Rush Truck Center locations in 14 states. The Company anticipates that the purchase price for the assets of Asbury Automotive Atlanta, LLC will be paid in cash and partially financed under the Company’s floor plan and accounts receivable financing arrangements and the incurrence of long-term debt for the real estate. The Company expects the transaction to be accretive to future earnings. The completion of the acquisition is subject to several closing conditions, including the approval of the non-Peterbilt manufacturers currently represented by Nalley Motor Trucks, and is expected to close in the first quarter of 2011.

Key Performance Indicator

Absorption Rate. Management uses several performance metrics to evaluate the performance of its commercial vehicle dealerships, and considers Rush Truck Centers’ “absorption rate” to be of critical importance. Absorption rate is calculated by dividing the gross profit from the parts, service and body shop 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, then gross profit from the sale of a commercial vehicle, after sales commissions and inventory carrying costs, directly impacts operating profit. In 1999, the Company’s truck dealerships’ absorption rate was approximately 80%. The Company has made a concerted effort to increase its absorption rate since 1999. The Company’s truck dealerships achieved a 105.5% absorption rate for the year in 2010 and 95.7% absorption rate for the year in 2009.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations are based on the Company’s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The Company believes the following accounting policies, which are also described in Note 2 of the Notes to the Consolidated Financial Statements, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Inventories

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

Goodwill

Goodwill and other intangible assets that have indefinite lives are not amortized but instead are tested at least annually by reporting unit for impairment, or more frequently when events or changes in circumstances indicate that the asset might be impaired.

Goodwill is reviewed for impairment utilizing a two-step process. The first step requires the Company to compare the fair value of the reporting unit, which is the same as the segment, to the respective carrying value. The Company considers its segment to be a reporting unit for purposes of this analysis. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is greater than the fair value, there is an indication that an impairment may exist and a second step is required. In the second step of the analysis, the implied fair value of the goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit’s goodwill, the difference is recognized as an impairment loss.

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

The Company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions it used to test for impairment losses on goodwill. However, if actual results are not consistent with our estimates or assumptions, or certain events occur that might adversely affect the reported value of goodwill in the future, the Company may be exposed to an impairment charge that could be material. Such events may include, but are not limited to, strategic decisions made in response to economic and competitive conditions or the impact of the current economic environment.

The Company has historically performed an annual impairment review of goodwill during the fourth quarter of each year, however, an interim evaluation of goodwill was required during the second quarter of 2009 due to General Motors’ decision to terminate production of medium-duty GMC trucks, which resulted in the winding-down of the Company’s medium-duty GMC truck franchises. The goodwill allocation was based on the relative fair values of the medium-duty GMC truck franchises and the portion of the Company’s Truck Segment remaining. The Company’s Truck Segment recorded a non-cash charge of $0.8 million related to the impairment of the goodwill of its medium-duty GMC truck franchises. See Note 18 for further discussion of the wind-down of the Company’s medium-duty GMC truck franchise agreements.

Goodwill was tested for impairment during the fourth quarter of 2010 and no impairment write down was required. The fair value of each of our reporting units exceeded the carrying value of its net assets. As a result, we were not required to conduct the second step of the impairment test. The Company does not believe any of its reporting units are at risk of failing step one of the impairment test.

Finance and Insurance Revenue Recognition

Finance income related to the sale of a unit is recognized when the finance contract is sold to a finance company. During 2010, 2009 and 2008, finance contracts were not retained by the Company for any significant length of time because finance contracts are generally sold to finance companies concurrent with the sale of the related unit. The Company arranges financing for customers through various institutions and receives financing fees from the lender equal to either the difference between the interest rates charged to customers over the predetermined interest rates set by the financing institution or a commission for the placement of contracts. The Company also receives commissions from the sale of various insurance products to customers.

The Company may be charged back for unearned financing or insurance contract fees in the event of early termination of the contracts by customers. In the case of finance contracts, a customer may prepay, or fail to pay, thereby terminating the underlying contract. Revenues from these fees are recorded at the time of the sale of a unit and a reserve for future amounts which might be charged back is established based on historical chargeback results and the termination provisions of the applicable contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on other insurance products. The Company’s finance and insurance revenue recognition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate future charge-backs. The Company’s estimate of future charge-backs is based primarily on historical experience. The actual amount of historical charge-backs has not been significantly different than the Company’s estimates.

Insurance Accruals

The Company is partially self-insured for a portion of the claims related to its property and casualty insurance programs, requiring it to make estimates regarding expected losses to be incurred. The Company engages a third party administrator to assess any open claims and the Company adjusts its accrual accordingly on an annual basis. The Company is also partially self-insured for a portion of the claims related to its worker’s compensation and medical insurance programs. The Company uses actuarial information provided from third party administrators to calculate an accrual for claims incurred, but not reported, and for the remaining portion of claims that have been reported.

Changes in the frequency, severity, and development of existing claims could influence the Company’s reserve for claims and financial position, results of operations and cash flows. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions it used to calculate its self-insured liabilities. However, if actual results are not consistent with our estimates or assumptions, the Company may be exposed to losses or gains that could be material. A 10% change in the Company’s estimate would have changed its reserve for these losses at December 31, 2010 by $0.4 million.

Accounting for Income Taxes

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

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

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

Derivative Instruments and Hedging Activities

The Company utilizes derivative financial instruments to manage its interest rate risk. The types of risks hedged are those relating to the variability of cash flows and changes in the fair value of the Company’s financial instruments caused by movements in interest rates. The Company assesses hedge effectiveness at the inception and during the term of each hedge. Derivatives are reported at fair value on the accompanying Consolidated Balance Sheets.

The effective portion of the gain or loss on the Company’s cash flow hedges are reported as a component of accumulated other comprehensive loss. Hedge effectiveness will be assessed quarterly by comparing the changes in cumulative gain or loss from the interest rate swap with the cumulative changes in the present value of the expected future cash flows of the interest rate swap that are attributable to changes in the LIBOR rate. If the interest rate swaps become ineffective, portions of these interest rate swaps would be reported as a component of interest expense in the accompanying Consolidated Statements of Income.

Results of Operations

The following discussion and analysis includes the Company’s historical results of operations for 2010, 2009 and 2008. The following table sets forth for the years indicated certain financial data as a percentage of total revenues:

		Year Ended December 31,
		2010				2009				2008
New and used commercial vehicle sales			61.9	%			61.5	%			66.3	%
Parts and service sales			32.7				32.9				29.1
Lease and rental			4.5				4.5				3.5
Finance and insurance			0.5				0.6				0.8
Other			0.4				0.5				0.3
Total revenues			100.0				100.0				100.0
Cost of products sold			81.0				82.0				82.2
Gross profit			19.0				18.0				17.8
Selling, general and administrative			15.2				16.0				13.9
Depreciation and amortization			1.0				1.3				1.0
Operating income			2.8				0.7				2.9
Interest expense, net			0.4				0.5				0.4
Income from continuing operations before income taxes			2.4				0.2				2.5
Provision (benefit) for income taxes			0.8				(0.2	)			0.9
Income from continuing operations			1.6				0.4				1.6
Income from discontinued operations			0.4				0.1				0.2
Net income			2.0	%			0.5	%			1.8	%

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

														% Change
														2010				2009
														vs				vs
		2010				2009				2008				2009				2008
Vehicle unit sales:
New heavy-duty vehicles			4,746				3,972				5,516				19.5	%			-28.0	%
New medium-duty vehicles			2,934				2,643				3,773				11.0	%			-29.8	%
Total new vehicle unit sales			7,680				6,615				9,289				16.1	%			-28.8	%
Used vehicles sales			3,461				2,875				3,234				20.4	%			-11.1	%
Vehicle revenue:
New heavy-duty vehicles		$	595.4			$	467.1			$	665.5				27.5	%			-29.8	%
New medium-duty vehicles			190.1				163.7				222.1				16.1	%			-26.3	%
Total new vehicle revenue		$	785.5			$	630.8			$	887.6				24.5	%			-28.9	%
Used vehicle revenue		$	139.0			$	106.5			$	149.9				30.5	%			-29.0	%
Other vehicle revenue(1)		$	2.1			$	1.4			$	3.7				50.0	%			-62.2	%
Truck dealership absorption rate:			105.5	%			95.7	%			105.5	%			10.2	%			-9.3	%

Industry

We currently operate in the commercial vehicle market. There has historically been a high correlation between new product sales in the commercial vehicle market and the rate of change in U.S. industrial production and the U.S. gross domestic product.

Heavy-Duty Truck Market

The Company serves the U.S. retail heavy-duty truck market, which is affected by a number of factors relating to general economic conditions, including fuel prices, government regulation, interest rate fluctuations, economic recessions, other methods of transportation and customer business cycles. In addition, unit sales of new commercial vehicles have historically been subject to substantial cyclical variation based on general economic conditions. According to data published by A.C.T. Research, in recent years total U.S. retail sales of new Class 8 trucks have ranged from a low of approximately 97,000 in 2009 to a high of approximately 291,000 in 2006. Class 8 trucks are defined by the American Automobile Association as trucks with a minimum gross vehicle weight rating above 33,000 pounds. The Company’s share of the U.S. Class 8 truck sales market increased to 4.3% in 2010, up from 4.1% in 2009.

Typically, Class 8 trucks are assembled by manufacturers utilizing certain components manufactured by other companies, including engines, transmissions, axles, wheels and other components. As commercial vehicles and commercial vehicle components have become increasingly complex, the ability to provide state-of-the-art service for commercial vehicles has become a competitive factor in the industry. The ability to provide such service requires a significant capital investment in diagnostic and other equipment, parts inventory and highly trained service personnel. Environmental Protection Agency (“EPA”) and U.S. Department of Transportation (“DOT”) regulatory guidelines for service processes, including body shop, paint work and waste disposal, require sophisticated operating and testing equipment to ensure compliance with environmental and safety standards. Additionally, we believe that more of our customers will lease Class 8 trucks as fleets and seek to establish full-service leases or rental contracts, which provide for turnkey service including parts, maintenance and, potentially, fuel, fuel tax reporting and other services. Differentiation between commercial vehicle dealers has become less dependent on pure price competition and is increasingly based on a dealer’s ability to offer a wide variety of services to their clients. Such services include the following: efficient, conveniently located and easily accessible commercial vehicle service centers with an adequate supply of replacement parts; financing for commercial vehicle purchases; leasing and rental programs; and the ability to accept multiple unit trade-ins related to large fleet purchases. We believe our one-stop center concept and the size and geographic diversity of our dealer network gives us a competitive advantage in providing these services.

A.C.T. Research currently estimates approximately 179,000 new Class 8 trucks will be sold in the United States in 2011, compared to approximately 110,000 new Class 8 trucks sold in 2010. The Company believes that demand for new Class 8 trucks will gradually increase throughout 2011 due to the age of vehicles in operation and improving general economic conditions. A.C.T. Research currently forecasts sales of Class 8 trucks in the U.S. to be approximately 235,000 in 2012.

Medium-Duty Truck Market

Many of our Rush Truck Centers sell medium-duty trucks manufactured by Peterbilt, International, Hino, UD, Ford, Mitsubishi Fuso or Isuzu, and all of our Rush Truck Centers provide parts and service for medium-duty trucks. Medium-duty trucks are principally used in short-haul, local markets as delivery vehicles. Medium-duty trucks typically operate locally and generally do not venture out of their service areas overnight.

A.C.T. Research currently forecasts sales of Class 4 through 7 commercial vehicles in the U.S. to be approximately 128,000 in 2011 compared to 117,000 in 2010. A.C.T. Research currently forecasts sales of Class 4 through 7 commercial vehicles in the U.S. to be approximately 160,000 in 2012.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Revenues

Revenues increased $297.5 million, or 24.8%, in 2010, compared to 2009. Sales of new and used commercial vehicles increased $187.9 million, or 25.4%, in 2010, compared to 2009. The Company believes that demand for its products and services will increase if general economic conditions in the United States continue to improve and credit is made available on reasonable terms to a wider range of buyers. Our parts, service and body shop revenues increased in 2010 compared to 2009, primarily due to increased maintenance and repair as commercial vehicle utilization continues to increase.

The Company sold 4,746 heavy-duty trucks in 2010, a 19.5% increase compared to 3,972 heavy-duty trucks in 2009. According to A.C.T. Research, the U.S. Class 8 truck market increased 13.5% in 2010, compared to 2009. The Company’s share of the U.S. Class 8 truck sales market was approximately 4.3% in 2010. The Company expects its market share to range between 4.1% and 4.4% of U.S. Class 8 truck sales in 2011. This market share percentage would result in the sale of approximately 7,300 to 7,700 of Class 8 trucks in 2011 based on A.C.T. Research’s estimate that U.S. retail sales will increase to 179,000 units.

The Company sold 2,934 medium-duty commercial vehicles, including 457 buses, in 2010, an 11.0% increase compared to 2,643 medium-duty commercial vehicles, including 368 buses, in 2009. A.C.T. Research estimates that unit sales of Class 4 through 7 commercial vehicles in the U.S. increased approximately 5.6% in 2010, compared to 2009. In 2010, the Company achieved a 2.5% share of the Class 4 through 7 commercial vehicle sales market in the U.S. As a result of acquisitions that occurred during 2010, the Company expects its market share to range between 2.8% and 3.0% of U.S. Class 4 through 7 commercial vehicle sales in 2011. This market share percentage would result in the sale of approximately 3,600 to 3,900 of Class 4 through 7 commercial vehicles in 2011 based on A.C.T. Research’s current U.S. retail sales estimates of 128,000 units.

The Company sold 3,461 used commercial vehicles in 2010, a 20.4% increase compared to 2,875 used commercial vehicles in 2009. The Company expects to sell approximately 3,500 to 3,700 used commercial vehicles in 2011. For 2011, the Company expects used truck sales to be largely dependent upon our ability to acquire quality used commercial vehicles and maintain an adequate used commercial vehicle inventory.

Parts and service sales increased $94.1 million, or 23.8%, in 2010, compared to 2009. Aftermarket parts, service and body shop sales remained strong throughout 2010 as freight movement increased and aging trucks were put back into service. The Company’s acquisition of Lake City International contributed $25.1 million of the increase. As commercial vehicle utilization remains high, the Company expects parts, service and body shop sales to continue to remain strong through 2011.

Truck lease and rental revenues increased $13.7 million, or 25.5%, in 2010, compared to 2009. The Company’s acquisition of Lake City International contributed $5.9 million of the increase. The remainder of the increase in lease and rental revenue is consistent with management’s expectations, which are based upon the increased number of units put into service in the lease and rental fleet during 2009 and 2010 and increasing rental fleet utilization. The Company expects lease and rental revenue to increase 10% to 13% during 2011, compared to 2010 based on the increase of units in the lease and rental fleet and the acquisition of Lake City International.

Finance and insurance revenues increased $0.5 million, or 6.1%, in 2010, compared to 2009. The increase in finance and insurance revenue is a direct result of the increase in new and use commercial vehicle sales. The Company expects finance and insurance revenue to fluctuate proportionately with the Company’s new and use commercial vehicle sales in 2011. Finance and insurance revenues have limited direct costs and, therefore, contribute a disproportionate share of the Company’s operating profits.

Other income increased $1.3 million, or 23.9% in 2010, compared to 2009. Other income consists primarily of the gain on sale realized on trucks from the lease and rental fleet, document fees related to commercial vehicle sales, mineral royalties, an adjustment of a liability related to retail finance contracts sold with recourse and purchase discounts.

Gross Profit

Gross profit increased $69.2 million, or 32.1%, in 2010, compared to 2009. Gross profit as a percentage of sales increased to 19.0% in 2010, from 18.0% in 2009. This increase is primarily a result of a change in our product sales mix.

Gross margins on Class 8 truck sales increased to 7.4% in 2010, from 5.8% in 2009. Gross margins on Class 8 truck sales in 2010 were impacted by a change in our product sales mix that included an increased demand for vocational trucks, which typically are higher margin sales, and a lower percentage of large fleet sales, which are typically lower margin sales. In 2011, the Company expects overall gross margins from Class 8 truck sales to return to historic levels of approximately 6.5% to 7.5%, but this will largely depend upon general economic conditions and the availability of credit to retail customers. The Company recorded expense of $1.9 million to increase its new heavy-duty truck valuation allowance in 2010 and $5.8 million in 2009.

Gross margins on medium-duty commercial vehicle sales increased to 5.6% in 2010, from 5.5% in 2009. For 2011, the Company expects overall gross margins from medium-duty commercial vehicle sales of approximately 5.5% to 6.2%, but this will largely depend upon general economic conditions and the availability of credit to retail customers. The Company recorded expense of $0.6 million to increase its new medium-duty commercial vehicle valuation allowance in 2010 and $2.5 million in 2009.

Gross margins on used commercial vehicle sales increased to 12.2% in 2010, from 6.9% in 2009. This increase is primarily a result of increased demand for quality used commercial vehicles and a decrease in the supply of quality used commercial vehicles. The Company expects margins on used commercial vehicles will return to the historical range of approximately 8.0% to 10.0% during 2011, but this will largely depend upon general economic conditions and the availability of credit to retail customers. The Company recorded expense of $1.5 million to increase its used commercial vehicle valuation allowance in 2010 and $5.0 million in 2009.

Gross margins from the Company’s parts, service and body shop operations decreased to 38.5% in 2010, from 38.8% in 2009. Gross profit for the parts, service and body shop departments increased to $188.5 million in 2010, from $153.2 million in 2009. The Company expects gross margins on parts, service and body shop operations to range 38.0% to 40.0% in 2011.

Gross margins from truck lease and rental sales increased to 14.9% in 2010, from approximately 11.5% in 2009. The increase in lease and rental revenue is primarily attributable to increased utilization of vehicles in the Company’s rental fleet and increased variable rental revenue that is based on the miles that vehicles being leased are driven. The Company expects gross margins from lease and rental sales of approximately 15.0% to 20.0% during 2011. The Company’s policy is to depreciate its lease and rental fleet using a straight line method over the 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.

Finance and insurance revenues and other income, as described above, have limited direct costs and, therefore, contribute a disproportionate share of gross profit.

Selling, General and Administrative Expenses

Selling, General and Administrative (“SG&A”) expenses increased $35.2 million, or 18.3%, in 2010, compared to 2009. SG&A expenses as a percentage of sales decreased to 15.2% in 2010, from 16.0% in 2009. Prior to 2009, SG&A expenses as a percentage of total revenue historically ranged from 10.0% to 15.0%. In general, when new and used commercial vehicle revenue decreases as a percentage of revenue, SG&A expenses as a percentage of total revenue will be at, or exceed, the higher end of this range. Extremely low commercial vehicle revenue during 2009 and early 2010, caused SG&A expenses as a percentage of sales to fall outside this range. For 2011, the Company expects the selling portion of SG&A expenses to be approximately 25% to 30% of new and used commercial vehicle gross profit. The Company expects the general and administrative portion of SG&A expenses to increase approximately 10.0% to 15.0% primarily due to an expected increase in personnel costs related to increased parts and service business, the full year effect of acquisitions made in 2010, and the reinstatement of certain employee benefits. For 2011, the Company expects SG&A expenses as a percentage of total revenue to range from 13.0% to 15.0%.

Interest Expense, Net

Net interest expense decreased $0.3 million, or 5.8%, in 2010, compared to 2009. The Company’s floor plan agreement with GE Capital was modified at the end of 2010, which increased interest rates related to floor plan notes payable, however, net interest expense in 2011 will vary based on inventory levels and cash available for prepayment of floor plan financing.

Income from Continuing Operations before Income Taxes

Income from continuing operations before income taxes increased $34.4 million in 2010, compared to 2009, as a result of the factors described above. The Company believes that income from continuing operations before income taxes in 2011 will increase compared to 2010 based on the factors described above.

Income Taxes

Income taxes increased $14.9 million in 2010, compared to 2009. Prior to the application of alternative fuel tax credits, the Company’s tax rate during 2010 was 39%. The Company expects its effective tax rate to be approximately 36% to 39% of pretax income in 2011. In 2010, the Company received $2.5 million in tax credits for sales of alternative fuel vehicles to tax-exempt entities, compared to $5.3 million in 2009. The federal tax law that extended tax credits for alternative fuel vehicles expired on December 31, 2010, therefore, the Company does not expect to receive tax benefits related to these credits in the future.

Income from Discontinued Operations, net

Income from discontinued operations, net of income taxes increased $5.9 million in 2010 compared to 2009. Income from discontinued operations includes operating results and a gain of $10.1 million on the disposition for the Company’s construction equipment business.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Revenues

Revenues decreased $370.7 million, or 23.6%, in 2009, compared to 2008. Sales of new and used commercial vehicles decreased $302.5 million, or 29.1%, in 2009, compared to 2008. Uncertain economic conditions, the weak freight environment, slowing construction markets and tight credit markets contributed to decreased demand for commercial vehicles and construction equipment as well as aftermarket service in 2009.

The Company sold 3,972 heavy-duty trucks in 2009, a 28.0% decrease compared to 5,516 heavy-duty trucks in 2008. According to A.C.T. Research, the U.S. Class 8 truck market decreased 30.6% in 2009, compared to 2008. The Company’s share of the U.S. Class 8 truck sales market was approximately 4.1% in 2009.

The Company sold 2,643 medium-duty commercial vehicles, including 368 buses, in 2009, a 29.9% decrease compared to 3,773 medium-duty commercial vehicles, including 239 buses, in 2008. A.C.T. Research estimates that unit sales of Class 4 through 7 commercial vehicles in the U.S. decreased approximately 33.2% in 2009, compared to 2008. In 2009, the Company achieved a 2.4% share of the Class 4 through 7 commercial vehicle sales market in the U.S.

The Company sold 2,875 used commercial vehicles in 2009, an 11.1% decrease compared to 3,234 used commercial vehicles in 2009.

Parts and service sales decreased $62.5 million, or 13.7%, in 2009, compared to 2008. Aftermarket parts, service and body shop sales were negatively impacted by excess capacity during 2009, as many customers were able to put their excess new vehicle capacity into service, allowing them to delay repair and maintenance and use trucks not being utilized for replacement parts needs.

Truck lease and rental revenues decreased $1.1 million, or 2.0%, in 2009, compared to 2008. The decrease in lease and rental revenue is primarily attributable to decreased utilization of vehicles in the Company’s rental fleet and decreased variable lease revenue that is based on the miles that vehicles being leased are driven.

Finance and insurance revenues decreased $4.3 million, or 36.7%, in 2009, compared to 2008.

Other income decreased $0.3 million, or 5.0% in 2009, compared to 2008.

Gross Profit

Gross profit decreased $64.6 million, or 23.0%, in 2009, compared to 2008. Gross profit as a percentage of sales increased to 18.0% in 2009, from 17.8% in 2008. This increase was primarily a result of a change in our product sales mix. Commercial vehicle sales, a lower margin revenue item, decreased as a percentage of total revenue to 59.6% in 2009, from 62.9% in 2008. Parts and service revenue, a higher margin revenue item, increased as a percentage of total revenue to 32.9% in 2009, from 29.1% in 2008.

Gross margins on Class 8 truck sales decreased to 5.8% in 2009, from 7.7% in 2008. Gross margins on Class 8 truck sales during 2009 were negatively impacted by a decreased demand for new trucks and a change in our product sales mix that included a higher percentage of large fleet sales, which are typically lower margin sales. The Company recorded expense of $5.8 million to increase its new heavy-duty truck valuation allowance in 2009 and $5.2 million in 2008.

Gross margins on medium-duty commercial vehicle sales increased to 5.5% in 2009, from 5.1% in 2008. The Company recorded expense of $2.5 million to increase its new medium-duty commercial vehicle valuation allowance in 2009 and $1.7 million in 2008.

Gross margins on used commercial vehicle sales increased to 6.9% in 2009, from 3.6% in 2008. This increase is primarily a result of write-downs of used commercial vehicle inventory values that caused gross margins on used commercial vehicle sales to decrease below normal levels in 2008. The Company recorded expense of $5.0 million to increase its used commercial vehicle valuation allowance in 2009 and $8.5 million in 2008.

Gross margins from the Company’s parts, service and body shop operations decreased to 38.8% in 2009, from 40.8% in 2008. Gross profit for the parts, service and body shop departments decreased to $153.2 million in 2009, from $186.9 million in 2008.

Gross margins from truck lease and rental sales decreased to 11.5% in 2009, from approximately 14.5% in 2008. The decrease in lease and rental revenue is primarily attributable to decreased utilization of vehicles in the Company’s rental fleet and decreased variable rental revenue that is based on the miles that vehicles being leased are driven.

Finance and insurance revenues and other income, as described above, have limited direct costs and, therefore, contribute a disproportionate share of gross profit.

Selling, General and Administrative Expenses

Selling, General and Administrative (“SG&A”) expenses decreased $26.5 million, or 12.1%, in 2009, compared to 2008. SG&A expenses as a percentage of sales increased to 16.0% in 2009, from 13.9% in 2008. In 2009, the selling portion of SG&A expenses, which consists primarily of commissions on commercial vehicle sales, decreased 26.6% and the general and administrative portion of SG&A expenses decreased 10.7% compared to 2008.

Interest Expense, Net

Net interest expense decreased $1.5 million, or 21.2%, in 2009, compared to 2008.

Income from Continuing Operations before Income Taxes

Income before income taxes decreased $37.1 million, or 95.1%, in 2009, compared to 2008, as a result of the factors described above.

Income Taxes

Income taxes decreased $17.0 million, or 122.9%, in 2009, compared to 2008. In 2009, the Company received $5.3 million in tax credits for sales of alternative fuel vehicles to tax-exempt entities, compared to $0.7 million in 2008.

Income from Discontinued Operations, net

Income from discontinued operations, net of income taxes decreased $2.9 million in 2009 compared to 2008. Income from discontinued operations includes operating results for the Company’s construction equipment business.

Effects of Inflation

Inflationary factors such as increases in the cost of products and overhead costs may adversely affect the Company’s operating results. Although the Company does not believe that inflation has had a material impact on its financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on its ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of revenues if the selling prices of our products do not increase with these increased costs.

Liquidity and Capital Resources

The Company’s short-term cash requirements are primarily for working capital, inventory financing, the improvement and expansion of existing facilities, the development and implementation of SAP enterprise software and dealership management system, and the construction of new facilities. Historically, these cash requirements have been met through the retention of profits, borrowings under our floor plan arrangements and bank financings. The Company does not expect the absence of cash flows from discontinued operations to materially affect future liquidity and capital resources. As of December 31, 2010, the Company had working capital of approximately $143.8 million, including $169.0 million in cash available to fund our operations. The Company believes that these funds are sufficient to meet any operating requirements for at least the next twelve months.

Available cash is generally invested in variable interest rate instruments in accordance with the Company’s investment policy which is to invest excess funds in a manner that will provide maximum preservation and safety of principal. The portfolio is maintained to meet anticipated liquidity needs of the Company in order to ensure the availability of cash to meet the Company’s obligations and to minimize potential liquidation losses. As of December 31, 2010, the majority of excess cash is maintained in a depository account or invested in a money market fund that invests exclusively in U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Treasury, and repurchase agreements collateralized by such obligations.

The Company has a secured line of credit that provides for a maximum borrowing of $8.0 million. There were no advances outstanding under this secured line of credit at December 31, 2010, however, $7.1 million was pledged to secure various letters of credit related to self-insurance products, leaving $0.9 million available for future borrowings as of December 31, 2010.

The Company’s long-term real estate debt agreements and floor plan credit agreement require the Company to satisfy various financial ratios such as the debt to worth ratio, leverage ratio and the fixed charge coverage ratio and certain requirements for tangible net worth and GAAP net worth. At December 31, 2010, the Company was in compliance with all debt covenants related to debt secured by real estate and its floor plan credit agreement. The Company does not anticipate any breach of the covenants in the foreseeable future.

Titan Technology Partners is currently implementing SAP enterprise software and a new SAP dealership management system for the Company. The total cost of the SAP software and implementation is estimated to be approximately $39.0 million. As of December 31, 2010, the Company had cumulative expenditures of $36.2 million related to the SAP project. The Company expects to spend approximately $2.5 million to $3.0 million related to the SAP project during 2011.

The Company also expects to make capital expenditures for recurring items such as computers, shop tools and equipment and vehicles of approximately $15.0 million during 2011.

The Company currently anticipates funding its capital expenditures relating to the implementation of the SAP enterprise software and SAP dealership management system, improvement and expansion of existing facilities, construction of new facilities, recurring expenses and any stock repurchases through its operating cash flow. The Company expects to finance 70% to 80% of the appraised value of any newly constructed or purchased facilities, which will increase the Company’s cash and cash equivalents by that amount.

On February 21, 2011, the Company acquired certain assets of Heintzelman’s Truck Center, Inc., which consisted of a Ford commercial vehicle dealership in Orlando, Florida. The Company is operating the facility as a full-service Rush Truck Center offering medium-duty trucks, parts and service. The transaction was valued at approximately $4.7 million, with the purchase price paid in cash.

The Company is currently under contract to construct a dealership facility in Fort Worth, Texas at an estimated cost of $4.8 million. The construction project will continue throughout 2011.

As previously mentioned, the Company has entered into agreements to purchase certain assets of Asbury Automotive Atlanta, LLC. The Company anticipates that the purchase price for the assets of Asbury Automotive Atlanta, LLC, will be paid in cash and partially financed under the Company’s floor plan and accounts receivable financing arrangements and the incurrence of long-term debt for the real estate. The completion of the acquisition is subject to several closing conditions, including the approval of the non-Peterbilt manufacturers currently represented by Nalley Motor Trucks, and is expected to close in the first quarter of 2011.

The Company has no other material commitments for capital expenditures as of December 31, 2010, except that the Company will continue to purchase vehicles for its lease and rental division and authorize capital expenditures for improvement and expansion of its existing dealership facilities and construction of new facilities based on market opportunities. The Company expects to purchase or lease trucks worth approximately $55.0 million for its leasing operations in 2011, depending on customer demand, all of which will be financed.

Cash Flows

Cash and cash equivalents increased by $19.9 million during the year ended December 31, 2010, and decreased by $2.7 million during the year ended December 31, 2009. The major components of these changes are discussed below. Cash flows from discontinued operations are included in the components of the statement of cash flows as described below.

Cash Flows from Operating Activities

Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. During 2010, operating activities resulted in net cash provided by operations of $66.4 million. Cash provided by operating activities was primarily impacted by the increased levels of inventory and the increase in other current assets, offset by increases in accounts payable and accrued expenses. The majority of commercial vehicle inventory is financed through the Company’s floor plan credit agreement. During 2009, operating activities resulted in net cash provided by operations of $150.3 million.

Cash flows from operating activities as adjusted for all draws and (payments) on floor plan notes (“Adjusted Cash Flows from Operating Activities”) was $110.2 million for the year ended December 31, 2010, and $56.8 million for the year ended December 31, 2009. Generally, all vehicle dealers finance the purchase of vehicles with floor plan borrowings, and our agreements with our floor plan providers require us to repay amounts borrowed for the purchase of such vehicles immediately after they are sold. As a result, changes in floor plan notes payable are directly linked to changes in vehicle inventory. However, as reflected in our consolidated statements of cash flows, changes in inventory are recorded as cash flows from operating activities, and draws and (payments) on floor plan notes are recorded as cash flows from financing activities.

Management believes that information about Adjusted Cash Flows from Operating Activities provides investors with a relevant measure of liquidity and a useful basis for assessing the Company’s ability to fund its activities and obligations from operating activities. Floor plan notes payable is classified as a current liability and, therefore, is included in the working capital amounts discussed above.

Adjusted Cash Flows from Operating Activities is a non-GAAP financial measure and should be considered in addition to, and not as a substitute for, cash flows from operating activities as reported in our consolidated statements of cash flows in accordance with U.S. GAAP. Additionally, this measure may vary among other companies; thus, Adjusted Cash Flows from Operating Activities as presented herein may not be comparable to similarly titled non-GAAP financial measures of other companies. Set forth below is a reconciliation of cash flow from operating activities as reported in our consolidated statement of cash flows, as if all changes in floor plan notes payable were classified as an operating activity (in thousands).

		Year Ended December 31,
		2010				2009
Net cash provided by operating activities (GAAP)		$	66,433			$	150,293
(Payments) draws on floor plan notes payable			43,724				(93,446	)
Adjusted Cash Flows from Operating Activities (Non-GAAP)		$	110,157			$	56,847

Cash Flows from Investing Activities

During 2010, cash used in investing activities was $96.7 million. Cash flows used in investing activities consist primarily of cash used for capital expenditures and business acquisitions offset by proceeds from the sale of Rush Equipment Centers. Capital expenditures of $84.3 million consisted of purchases of property and equipment, improvements to our existing dealerships and the purchase of a dealership facility in Phoenix, Arizona. Property and equipment purchases during 2010 consisted of $47.5 million for additional units for the rental and leasing operations, which was directly offset by borrowings of long-term debt. The Company expects to purchase or lease trucks worth approximately $55.0 million for its leasing operations in 2011, depending on customer demand, all of which will be financed. Cash proceeds from the disposition of Rush Equipment Centers were $26.2 million. Cash used in business acquisitions was $39.3 million during the year ended December 31, 2010. During 2011, the Company expects to make capital expenditures for recurring items such as computers, shop equipment and vehicles of approximately $15.0 million, in addition to $2.5 million to $3.0 million for the SAP project described above. See Note 16 of the Notes to Consolidated Financial Statements for a detailed discussion of these acquisitions.

During 2009, cash used in investing activities was $49.8 million. Cash flows used in investing activities consist primarily of cash used for capital expenditures. Capital expenditures of $50.5 million consisted of purchases of property and equipment, improvements to our existing dealership facilities and construction of our new facility in Oklahoma City, Oklahoma. Property and equipment purchases during 2009 consisted of $21.2 million for additional units for the rental and leasing operations, which was directly offset by borrowings of long-term debt.

Cash Flows from Financing Activities

Cash flows used in financing activities include borrowings and repayments of long-term debt and net payments of floor plan notes payable. Cash provided by financing activities was $50.2 million during 2010. The Company had borrowings of long-term debt of $66.6 million and repayments of long-term debt and capital lease obligations of $63.2 million during 2010. The Company had net borrowings of floor plan notes payable of $43.7 million during 2010. The borrowings of long-term debt were primarily related to units for the rental and leasing operations, refinancing existing real estate.

Cash used in financing activities was $97.9 million during 2009. The Company had borrowings of long-term debt of $50.4 million and repayments of long-term debt and capital lease obligations of $55.3 million during 2009. The Company had net payments of floor plan notes payable of $93.4 million during 2009. The borrowings of long-term debt were primarily related to units for the rental and leasing operations, refinancing existing real estate and financing the new Rush Truck Center in Oklahoma City.

Substantially all of the Company’s commercial vehicle purchases are made on terms requiring payment within 15 days or less from the date the commercial vehicles are invoiced from the factory. We financed substantially all of the purchases of commercial vehicle inventory under our wholesale security agreement with GE Capital. Interest under the wholesale security agreement was payable monthly and the rate varied from LIBOR plus 1.15% to LIBOR plus 1.50%, depending on the month-end average aggregate amount outstanding under our GE Capital floor plan financing agreement. The Company makes monthly interest payments to GE Capital on the amount financed, but is not required to commence loan principal repayments on any vehicle until such vehicle has been financed for 12 months or is sold.

On December 31, 2010 the Company entered into a $450.0 million credit agreement with GE Capital to replace the wholesale security agreement. All principal amounts outstanding bear interest at a rate per annum equal to the sum of the LIBOR rate plus 2.95% which is payable monthly. The credit agreement allows for prepayment of the inventory loans, up to 65% of the aggregate inventory loans outstanding, with monthly adjustments to the interest due. On December 31, 2010, the Company had approximately $229.9 million outstanding under its credit agreement with GE Capital.

Cyclicality

The Company’s business is dependent on a number of factors relating to general economic conditions, including fuel prices, interest rate fluctuations, credit availability, economic recessions, environmental and other government regulations and customer business cycles. Unit sales of new commercial vehicles have historically been subject to substantial cyclical variation based on these general economic conditions. According to data published by A.C.T. Research, in recent years total U.S. retail sales of new Class 8 trucks have ranged from a low of approximately 97,000 in 2009 to a high of approximately 291,000 in 2006. Through geographic expansion, concentration on higher margin parts and service operations and diversification of its customer base, the Company believes it has reduced the negative impact on the Company’s earnings of adverse general economic conditions or cyclical trends affecting the heavy-duty truck industry.

Off-Balance Sheet Arrangements

Other than operating leases, the Company does not have any obligation under any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, that has or is reasonably likely to have a material effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. A summary of our operating lease obligations by fiscal year is included in the “Contractual Obligations” section below.

Contractual Obligations

The Company has certain contractual obligations that will impact its short and long-term liquidity. At December 31, 2010, such obligations were as follows:

		Payments Due by Period
						Less than 1				1-3				3-5				More than 5
Contractual Obligations		Total				year				years				years				years
		(in thousands)
Long-term debt obligations (1)		$	252,129			$	62,279			$	95,582			$	81,668			$	12,600
Capital lease obligations(2)			46,548				9,186				18,470				13,836				5,056
Operating lease obligations(3)			34,493				7,233				10,088				5,621				11,551
Floor plan debt obligation			237,810				237,810				—				—				—
Interest obligations (4)			40,848				20,158				14,551				5,782				357
Purchase obligations(5)			6,062				5,126				936				—				—
Total		$	617,890			$	341,792			$	139,627			$	106,907			$	29,564

Item 7A.		Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of loss that may impact the financial position, results of operations, or cash flows of the Company due to adverse changes in financial market prices, including interest rate risk, and other relevant market rate or price risks.

The Company is exposed to some market risk through interest rates related to our floor plan financing agreements, variable rate real estate debt and discount rates related to finance sales. The majority of floor plan debt and variable rate real estate debt is based on LIBOR. As of December 31, 2010, the Company had floor plan borrowings and variable rate real estate debt of approximately $320.5 million. Assuming an increase or decrease in LIBOR of 100 basis points, annual interest expense could correspondingly increase or decrease by approximately $3.1 million. The Company provides all customer financing opportunities to various finance providers. The Company receives all finance charges in excess of a negotiated discount rate from the finance providers in the month following the date of the financing. The negotiated discount rate is variable, thus subject to interest rate fluctuations. This interest rate risk is mitigated by the Company’s ability to pass discount rate increases to customers through higher financing rates.

The Company is exposed to some market risk through interest rate swaps on some of the Company’s variable real estate debt. As of December 31, 2010, the Company has interest rate swaps with a total notional amount of $45.0 million. The swaps were designed to provide a hedge against changes in interest rates on some of the Company’s variable real estate debt. The swaps are collateralized by the underlying real estate. These interest rate swaps qualify for cash flow hedge accounting treatment and are considered effective. For additional information about the effect of the Company’s derivative instruments on the accompanying consolidated financial statements, see Note 9 — Financial Instruments and Fair Value of the notes thereto.

The Company is also exposed to some market risk through interest rates related to the investment of our current cash and cash equivalents which totaled $169.0 million on December 31, 2010. These funds are generally invested in variable interest rate instruments in accordance with the Company’s investment policy. As such instruments mature and the funds are reinvested, we are exposed to changes in market interest rates. This risk is mitigated by management’s ongoing evaluation of the best investment rates available for current and noncurrent high quality investments. If market interest rates were to increase or decrease immediately and uniformly by 100 basis points, the Company’s annual interest income could correspondingly increase or decrease by approximately $1.7 million.

In the past, the Company invested in interest-bearing short-term investments consisting of investment-grade auction rate securities classified as available-for-sale. As a result of the liquidity issues experienced in the global credit and capital markets, auctions for investment grade securities held by the Company have failed. The auction rate securities continue to pay interest in accordance with the terms of the underlying security; however, liquidity will be limited until there is a successful auction or until such time as other markets for these investments develop.

As of December 31, 2010, the Company holds $7.6 million of auction rate securities with underlying tax-exempt municipal bonds that mature in 2030. Given the current market conditions in the auction rate securities market, if the Company determines that the fair value of these securities has temporarily decreased by 10%, the Company’s equity could correspondingly decrease by approximately $0.8 million. If it is determined that the fair value of these securities is other-than-temporarily impaired by 10%, the Company could record a loss on its Consolidated Statements of Operations of approximately $0.8 million. For further discussion of the risks related to our auction rate securities, see Note 9 — Financial Instruments and Fair Value of the Notes to Consolidated Financial Statements.

Item 8.		Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm			41
Consolidated Balance Sheets as of December 31, 2010 and 2009			42
Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008			43
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2010, 2009 and 2008			44
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008			45
Notes to Consolidated Financial Statements			46

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
Rush Enterprises, Inc.

We have audited the accompanying consolidated balance sheets of Rush Enterprises, Inc. and subsidiaries (“the Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rush Enterprises, Inc. and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Rush Enterprises, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2011 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
San Antonio, Texas
March 11, 2011

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

(In Thousands, Except Shares and Per Share Amounts)

		December 31,
		2010				2009
Assets
Current assets:
Cash and cash equivalents		$	168,976			$	149,095
Accounts receivable, net			43,513				38,869
Inventories, net			321,933				252,219
Prepaid expenses and other			14,104				3,650
Assets held for sale			—				22,719
Deferred income taxes, net			10,281				11,414
Total current assets			558,807				477,966
Investments			7,575				7,575
Property and equipment, net			445,919				353,841
Goodwill, net			150,388				136,761
Other assets, net			5,244				1,154
Total assets		$	1,167,933			$	977,297
Liabilities and shareholders’ equity
Current liabilities:
Floor plan notes payable		$	237,810			$	189,256
Current maturities of long-term debt			62,279				55,545
Current maturities of capital lease obligations			7,971				5,730
Trade accounts payable			37,933				22,427
Accrued expenses			69,036				40,843
Total current liabilities			415,029				313,801
Long-term debt, net of current maturities			189,850				153,957
Capital lease obligations, net of current maturities			34,231				28,714
Other long-term liabilities			364				—
Deferred income taxes, net			63,540				54,600
Shareholders’ equity:
Preferred stock, par value $.01 per share; 1,000,000 shares authorized; 0 shares outstanding in 2010 and 2009			—				—
Common stock, par value $.01 per share; 60,000,000 class A shares and 20,000,000 class B shares authorized; 26,798,707 class A shares and 10,700,044 class B shares outstanding in 2010; and 26,437,848 class A shares and 10,689,375 class B shares outstanding in 2009			391				388
Additional paid-in capital			195,747				188,116
Treasury stock, at cost: 1,639,843 class B shares			(17,948	)			(17,948	)
Retained earnings			286,951				255,669
Accumulated other comprehensive loss, net of tax			(222	)			—
Total shareholders’ equity			464,919				426,225
Total liabilities and shareholders’ equity		$	1,167,933			$	977,297

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

RUSH ENTERPRISES, INC. AND SUBSIDIARIES

(In Thousands, Except Per Share Amounts)

		Year Ended December 31,
		2010				2009				2008
Revenues:
New and used commercial vehicle sales		$	926,584			$	738,705			$	1,041,189
Parts and service sales			489,259				395,133				457,669
Lease and rental			67,423				53,710				54,813
Finance and insurance			7,922				7,468				11,801
Other			6,739				5,437				5,721
Total revenue			1,497,927				1,200,453				1,571,193
Cost of products sold:
New and used commercial vehicle sales			854,879				695,334				973,404
Parts and service sales			300,783				241,933				270,754
Lease and rental			57,375				47,545				46,843
Total cost of products sold			1,213,037				984,812				1,291,001
Gross profit			284,890				215,641				280,192
Selling, general and administrative			227,467				192,296				218,775
Depreciation and amortization			15,720				15,890				15,273
(Loss) gain on sale of assets			(36	)			162				128
Operating income			41,667				7,617				46,272
Interest income (expense):
Interest income			127				54				2,636
Interest expense			(5,490	)			(5,749	)			(9,866	)
Total interest expense, net			5,363				5,695				7,230
Income from continuing operations before taxes			36,304				1,922				39,042
Provision (benefit) for income taxes			11,737				(3,173	)			13,864
Income from continuing operations			24,567				5,095				25,178
Income from discontinued operations, net of tax			6,715				789				3,687
Net income		$	31,282			$	5,884			$	28,865
Earnings per common share — Basic:
Income from continuing operations		$	0.66			$	0.14			$	0.66
Net income		$	0.84			$	0.16			$	0.76
Earnings per common share — Diluted:
Income from continuing operations		$	0.64			$	0.14			$	0.65
Net income		$	0.82			$	0.16			$	0.75