Gross Profit

             Gross profit decreased by approximately $1.7 million, or 2.3%, from $76.2 million to $74.5 million from the first six months of 2000 to the first six months of 2001. Gross profit as a percentage of sales increased from 16.6% in the first six months of 2000 to 18.4% in the first six months of 2001. This increase is the result of a change in product mix.  Increases in parts and service, and retail sales revenues, higher margin revenue categories, grew as a percentage of total revenues, while truck sales revenues, a lower margin revenue category, decreased as a percentage of total revenues.

Selling, General and Administrative Expenses

             Selling, general and administrative expenses increased by approximately $0.3 million, from $60.0 million to $60.3 million, or 0.5%, from the first six months of 2000 to the first six months of 2001. Approximately $5.4 million of 2001 SG&A expenses are directly related to new stores and facility expansions made subsequent to or during the second quarter of 2000.  SG&A expenses, net of new store openings and facility expansions, decreased $5.1 million or 8.5% from the second quarter of 2000 due to expense reduction actions taken in the latter half of 2000.  Selling, general and administrative expenses as a percentage of sales increased from 13.1% to 14.9% from the second quarter of 2000 to the second quarter of 2001.

Interest Expense

             Interest expense decreased by approximately $0.3 million from $7.2 million to $6.9 million, or 4.0%, from the first six months of 2000 to the first six months of 2001, primarily as the result of decreased levels of floorplan indebtedness coupled with lower interest rates on the Company’s variably financed debt.

Gain on Sale of Assets

             The Company recorded a pretax gain of approximately $0.8 million on the sale of real estate during the second quarter of 2001.

Income before Income Taxes

             Income before income taxes decreased by $2.0 million, or 42.5% from $4.7 million to $2.7 million from the first six months of 2000 to the first six months of 2001, as a result of the factors described above.

Income Taxes

             The Company has provided for taxes at a 40% effective rate.

Liquidity and Capital Resources

             The Company’s short-term cash needs are primarily for working capital, including inventory requirements, expansion of existing facilities and the acquisition of new facilities.  The Company currently has no plans to expand its existing facilities or acquire any new facilities.  These short-term cash needs have historically been financed with retained earnings and borrowings under credit facilities available to the Company.

             At June 30, 2001, the Company had working capital of approximately $6.7 million, including $22.7 million in cash and cash equivalents, $17.3 million in accounts receivable, $134.5 million in inventories, $1.4 million in prepaid expenses and $1.4 million in deferred income taxes, less $25.4 million of accounts payable and accrued expenses, $44.9 million of current maturities on long-term debt and advances outstanding under lines of credit, and $100.3 million outstanding under floor plan financing. The aggregate maximum borrowing limits under working capital lines of credit with its primary truck lender are approximately $13.5 million. The Company has four separate secured lines-of-credit that provide for an aggregate maximum borrowing of $6 million, $9.0 million, $8.0 million and $3.5 million.  Advances outstanding under these secured lines-of-credit were $6.0 million, $6.9 million, $7.5 million and $2.4 million, respectively, leaving $0.0 million, $2.1 million $0.5 million and $1.1 million available for future borrowings as of June 30, 2001.

             For the first six months of 2001, operating activities resulted in net cash provided by operations of approximately $53.2 million.  Net income of $1.6 million, decreases in inventory, accounts receivable and other current assets of $44.2 million, $3.1 million and $2.4 million, respectively, coupled with provisions for depreciation, amortization and deferred taxes totaling $9.3 million more than offset decreases in trade accounts payable and accrued expenses totaling $6.3 million and a gain on sale of property and equipment of $1.1 million.

             For the first six months of 2000, operating activities resulted in net cash provided by operations of $10.4 million.  Net income of $2.8 million, a decrease in accounts receivable of $0.6 million, an increase in trade accounts payable of $6.6 million coupled with provisions for depreciation, amortization and deferred taxes totaling $7.3 million offset  an increase in inventories and prepaid expenses and other of $4.0 million, a decrease in accrued expenses of $2.7 million and a gain on sale of property and equipment of $0.2 million.

             During the first six months of 2001, the Company used $4.7 million in investing activities, including fixed asset purchases of $8.6 million, a business acquisition purchase $0.5 million offset by proceeds from the sale of property, and equipment totaling $4.4 million.

             During the first six months of 2000, the Company used $19.5 million in investing activities, including purchases of property, plant and equipment of $20.7 million and an increase in other assets of $0.3 million, offset by proceeds from the sale of property, plant and equipment of $1.5 million.

             Net cash used in financing activities in the first three months of 2001 amounted to $44.7 million.  Proceeds from additional notes payable of $6.3 million and advances on lines of credit of $2.0 million was more than offset by a decrease in floor plan notes payable of $47.0 million and principal payments on notes payable of $6.0 million.

             Net cash generated from financing activities in the first six months of 2000 amounted to $4.5 million.  Proceeds from increased notes payable and advances outstanding on lines of credit of $34.5 million more than offset principal payments on notes payable and decreases in floor plan liability of $30.0 million.

             Substantially all of the Company's truck purchases from PACCAR are made on terms requiring payment within 15 days or less from the date of shipment of the trucks from the factory. The Company finances all, or substantially all, of the purchase price of its new truck inventory, and 75% of the loan value of its used truck inventory, under a floor plan arrangement with GMAC under which GMAC pays PACCAR directly with respect to new trucks. The Company makes monthly interest payments on the amount financed but is not required to commence loan principal repayments prior to sale on new vehicles to GMAC for a period of 12 months and for used vehicles for a period of three months. At June 30, 2001, the Company had approximately $61.8 million outstanding under its floor plan financing arrangement with GMAC. GMAC permits the Company to earn, for up to 15.0% of the amount borrowed under its floor plan financing arrangement with GMAC, interest at the prime rate, less 0.95%, on overnight funds deposited by the Company with GMAC.

             Substantially all of the Company’s new equipment purchases are financed by John Deere and Associates Commercial Corporation.  The Company finances all, or substantially all, of the purchase price of its new equipment inventory, under its floor plan facilities.  The agreement with John Deere provides interest free financing for four months after which time the amount financed is required to be paid in full, or an immediate 2.25% discount with payment due in 30 days.  When the equipment is sold prior to the expiration of the four month period, the Company is required to repay the principal within approximately 10 days of the sale.  Should the equipment financed by John Deere not be sold within the four month period, it is transferred to the John Deere or the Associates Commercial Corporation floor plan arrangements. The Company makes principal payments to Associates Commercial Corporation, for sold inventory, on the 15^th day of each month.  Used and rental equipment, to a maximum of book value, is financed under a floor plan arrangement with Associates Commercial Corporation.  The Company makes monthly interest payments on the amount financed and is required to commence loan principal repayments on rental equipment as book value reduces.  Principal payments, for sold used equipment, are made the 15^th day of each month following the sale.  The loans are collateralized by a lien on the equipment.  The Company’s floor plan agreements limit the aggregate amount of borrowings based on the book value of new and used equipment units.  As of June 30, 2001, the Company’s floor plan arrangement with Associates Commercial Corporation permits the financing of up to $20 million in construction equipment.  At June 30, 2001, the Company had $26.7 million and $11.8 million outstanding under its floor plan financing arrangements with John Deere and Associates Commercial Corporation, respectively.

Backlogs

             The Company enters firm orders into its backlog at the time the order is received.  Currently, customer orders are being filled in approximately one month and customers have historically placed orders expecting delivery within three to six months.  However, certain customers, including fleets and governments, typically place orders up to one year in advance of their desired delivery date.  The Company in the past has typically allowed customers to cancel orders at any time prior to delivery, and the Company’s level of cancellations is affected by general economic conditions, economic recessions and customer business cycles.  As a percentage of orders, cancellations historically have ranged from 5% to 12% of annual order volume.  The Company’s backlogs as of June 30, 2001 and 2000, were approximately $75 million and $100 million, respectively.  Backlogs decreased principally due to the above noted weaker demand for trucks.

Seasonality

             The Company’s heavy-duty truck business is moderately seasonal.  Seasonal effects on new truck sales related to the seasonal purchasing patterns of any single customer type are mitigated by the Company’s diverse customer base, which includes small and large fleets, governments, corporations and owner operators.  However, truck, parts and service operations historically have experienced higher volumes of sales in the second and third quarters.  The Company has historically received benefits from volume purchases and meeting vendor sales targets in the form of cash rebates, which are typically recognized when received.  Approximately 40% of such rebates are typically received in the fourth quarter, resulting in a seasonal increase in gross profit.

             Seasonal effects in the construction equipment business are primarily driven by the weather. Seasonal effects on construction equipment sales related to the seasonal purchasing patterns of any single customer type are mitigated by the Company's diverse customer base that includes contractors, for both residential and commercial construction, utility companies, federal, state and local government agencies, and various petrochemical, industrial and material supply type businesses that require construction equipment in their daily operations.

Cyclicality

             The Company's business, as well as the entire retail heavy-duty truck industry, is dependent on a number of factors relating to general economic conditions, including fuel prices, interest rate fluctuations, economic recessions and customer business cycles. In addition, unit sales of new trucks have historically been subject to substantial cyclical variation based on such general economic conditions. According to R.L. Polk, industry-wide domestic retail sales of heavy-duty trucks exceeded 200,000 units for only the fifth time, recording approximately 231,000 new truck registrations in 2000.  The industry forecasts a decrease ranging from 40% to 50% in heavy-duty new truck sales in 2001.  Although the Company believes that its geographic expansion and diversification into truck-related services, including financial services, leasing, rentals and service and parts, will reduce the overall impact to the Company resulting from general economic conditions affecting heavy-duty truck sales, the Company's operations will continue to be adversely affected by any continuation or renewal of general downward economic pressures or adverse cyclical trends.

Effects of Inflation

             The Company believes that the relatively moderate inflation over the last few years has not had a significant impact on the Company’s revenue or profitability.  The Company does not expect inflation to have any near-term material effect on the sales of its products, although there can be no assurance that such an effect will not occur in the future.