SecProbe.io

CORRESP
1
filename1.htm

VIA
EDGAR

January 15,
2010

H.
Christopher Owings

Assistant
Director

U.S.
Securities and Exchange Commission

Division
of Corporate Finance

100
F Street, N.E.

Washington,
DC 20549-3561

  Re:

  Rush
  Enterprises, Inc.

  Form 10-K
  for the Fiscal Year Ended December 31, 2008

  Filed
  March 13, 2009

  Form 10-Q
  for the Fiscal Quarter Ended September 30, 2009

  Filed
  November 9, 2009

  File
  No. 0-20797

Dear
Mr. Owings:

On
behalf of Rush Enterprises, Inc. (the “Company”), set forth below is the
Company’s response to comments received from the Staff (the “Staff”) of the
Securities and Exchange Commission (the “Commission”), by letter dated December 23,
2009, regarding the above referenced filings.
For your convenience, the text of the Staff’s comments is set forth below
in bold followed by the Company’s response.

Form 10-K
for the Fiscal Year Ended December 31, 2008

Item
1A. Risk Factors, page 13

1.                                      In
future filings, please delete the penultimate sentence in the first paragraph,
in which you state that additional risks not presently known to you or that you
currently deem immaterial may also impair your business and operations.  Please note that all material risks should be
described.  If risks are not deemed
material, you should not reference them.

In
future filings, the Company will remove from the first paragraph any statement
that (1) indicates that the risk factors the Company describes do not
include all material risks and (2) refers to risks that the Company
currently deems immaterial.

2.                                      In
future filings please include appropriate risk factor disclosure regarding your
substantial goodwill.

In
future filings, the Company will include a risk factor regarding our goodwill
substantially as follows:

An impairment in
the carrying value of goodwill 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 95% 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 period for the
current global recession and tight credit markets, further decline in economic
conditions or a slow, weak economic recovery, adverse changes in the regulatory
environment, 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 which 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.

Item 7. Management’s Discussion and Analysis of Financial Condition and
Results…page 23

Critical Accounting
Policies and Estimates, page 24

3.                                      We note
that several of your critical accounting policies contain substantially the
same information as is provided in Note 2 to your financial statements.  We remind you that such disclosure should
supplement, not duplicate, the description of accounting policies that are
already disclosed in the notes to the financial statements.  The disclosure should provide greater insight
into the quality and variability of information regarding financial condition
and operating performance.  While accounting
policy notes in the financial statements generally describe the method used to
apply an accounting principle, the discussion in MD&A should present a
company’s analysis of the uncertainties involved in applying a principle at a
given time or the variability that is reasonably likely to result from its
application over time.  You should also
quantify the sensitivity of your estimates to change, based on other outcomes
that are reasonably likely to occur and would have a material effect on your
financial statements.  Refer to Section V
of our Release 33-8350, available on our website at
www.sec.gov/rules/interp/33-8350.htm.

The
Company will adjust its MD&A disclosures in future filings to include
analysis of any uncertainties involved in the application of critical
accounting policies and to provide greater insight into the quality and
variability of information regarding financial condition and operating
performance.

Liquidity and Capital Resources, page 34

4.                                      You
disclose that you may request working capital advances in the minimum amount of
$100,000 from GE Capital, but such working capital advances may not cause the
total indebtedness owed GE Capital to exceed an amount equal to the wholesale
advances made against your current inventory less any payment reductions then
due.  Please provide, as of the end of
the period covered by the report, the amount you could have borrowed from GE
Capital based on this arrangement.

As
of December 31, 2008, the Company would not have been able to request a
working capital advance from GE Capital because the Company’s indebtedness to
GE Capital approximated wholesale advances against its current inventory
less any payment reductions then due.  In
future filings, the Company will disclose the amount available to borrow from
GE Capital based on this arrangement as of the end of the reporting period.

Financial Statements and
Supplementary Data, page 40

Consolidated Balance
Sheets, page 42

5.                                      We note
that you classified your auction rate securities as current assets as of December 31,
2008.  Based on your disclosures within
Note 18, we assume this classification was made based upon your belief that the
investment would liquidate within the next twelve months.  However, we note from your Form 10-Q for
the period ended September 30, 2009 that you have not yet sold these
investments.  Please explain to us why
you continue to believe that it is appropriate to classify these investments as
current assets.

As
of December 31, 2008, the Company classified its investments in auction
rate securities as a current asset as the Company reasonably expected that
these assets would be sold or redeemed within a year as of the latest balance
sheet date.  The Company believed its
auction rate securities would sell within twelve months because, at that time,
similar municipal-backed auction rate securities had experienced successful
auctions.  The Company no longer believes
these assets should be classified as current and will reclassify the auction
rate securities to long-term in future filings.

6.                                      Please
refer to the information disclosed on the face of your balance sheet concerning
your common stock and your treasury stock.
Please explain to us why the difference between the number of shares of Class A
and Class B stock issued and the number of shares of Class A and Class B
stock outstanding is greater than the number of shares disclosed as treasury
stock at December 31, 2008.
Additionally, since the number of shares issued and outstanding are not
the same at December 31, 2008, please reconcile the number of shares
disclosed on the face of your balance sheet to the number of shares issued and
outstanding as presented on the face of your statements of equity.

The
following is a reconciliation of our shares issued to our shares outstanding on
the balance sheet as of December 31, 2008.

  Class A

  Class B

  Shares issued per Balance Sheet

  26,327,734

  12,324,987

  Less: Treasury Shares per Balance Sheet

  —

  1,639,843

  Issued Shares less Treasury Shares

  26,327,734

  10,685,144

  Shares Outstanding per Balance Sheet

  26,255,974

  10,685,144

  Variance between Issued and Outstanding Shares

  71,760

  —

As
presented on the face of the balance sheet, the variance between the number of Class A
shares that are issued and the number of Class A shares that are
outstanding represents 71,760 unvested restricted Class A shares.  Unvested restricted shares are considered
issued but not outstanding.  Treasury
shares account for the entire difference between the number of Class B
shares that are issued and the number of Class B shares that are
outstanding on the face of the balance sheet.
We note Regulation S-X 210.5-02 provides the following, “for each class
of common shares state, on the face of the balance sheet, the number of shares issued or outstanding, as appropriate, and the dollar amount
thereof.”  In future filings, the Company
will report on the balance sheet only the Class A and Class B shares
outstanding.

On
the statement of equity, the Class A shares agree with the outstanding Class A
shares on the balance sheet.  The share
activity reported in Class B shares outstanding on the statement of equity
had two amounts incorrectly reported which are both considered immaterial as
the errors did not affect any dollar amounts reported.  Specifically, the previously presented
statement of equity included 15, 000 shares issued for “stock options exercised”
and the amount should have been 60,000 shares.
Further, we did not report the number of shares repurchased of 1,640,000
on the statement of equity.  As
previously stated, the dollar amounts reported were accurate.  Furthermore, the Company correctly accounted
for all shares in its earnings per share calculation, therefore the errors had
no effect on earnings per share and only affected the share amounts on the
statement of equity.  The Company will
adjust the statement of equity so that it reflects outstanding shares and
agrees to the face of the balance sheet.

The following represents the proposed statement of
equity, for the year ended December 31, 2008, that the Company intends to
present in future filings. (amounts in 000s except par value):

  Common Stock

  Shares

  Outstanding

  $0.01

  Par

  Additional

  Paid-In

  Treasury

  Retained

  Class A

  Class B

  Value

  Capital

  Stock

  Earnings

  Total

  Balance, December 31, 2007

  26,071

  12,265

  383

  178,274

  —

  220,920

  399,577

  Stock options exercised (including tax benefit of $791)

  130

  60

  2

  1,295

  1,297

  Stock-based compensation related to stock options and employee stock
  purchase plan

  —

  —

  —

  3,632

  3,632

  Issuance of common stock under employee stock purchase plan

  55

  —

  1

  617

  618

  Common stock repurchases

  (1,640

  )

  (17,948

  )

  (17,948

  )

  Net income

  —

  —

  —

  —

  —

  28,865

  28,865

  Balance, December 31, 2008

  26,256

  10,685

  $

  386

  $

  183,818

  $

  (17,948

  )

  $

  249,785

  $

  416,041

<Note> The Company has 26,327,734 Class A
shares issued.  The variance between the
number of Class A shares issued and outstanding represents 71,760 unvested
restricted Class A shares.  The
Company has 12,324,987 Class B shares issue.  The variance between the number of Class B
shares issued and outstanding represents 1,639,843 Class B shares held in
treasury.

Consolidated Statements of
Income, page 43

7.                                      We note
that you have classified “gain on sale of assets, net” below the subtotal for
operating income.  Either revise future
filings to reclassify this amount to be within the subtotal for operating
income, consistent with paragraph 45 of SFAS 144, or explain to us why it is appropriate
to classify this gain as a nonoperating income item.  Refer to Rule 5-03 of Regulation S-X.

In
future filings, the Company will reclassify “gain on sale of assets, net” to be
within the subtotal for operating income, consistent with paragraph 45 of SFAS
144.

Note 15. Income taxes, page 62

8.                                      We note
your statement on page 25 and page 48 that you have a valuation
allowance related to deferred tax assets in certain states.  However, we do not note any valuation
allowance in the detail of your deferred tax assets and liabilities on page 63.  Please explain to us how your disclosures on page 63
comply with the guidance in paragraph 43 of SFAS 109 concerning valuation
allowances.  Also tell us how you
considered including your tax valuation allowance in Note 6.

Historically,
the Company’s valuation allowances related to deferred tax assets have been
immaterial and therefore were not disclosed separately in the notes to our
financial statements.  As of December 31,
2008, the Company did not have a valuation allowance related to a deferred tax
asset.  The Company will continue to
analyze its deferred tax

assets
to ascertain the necessity of any related valuation allowances and, in future
filings, will adjust the disclosure on page 25 and page 48 of our Form 10-K,
and consider whether additional disclosure is required in the notes to our
financial statements, to more accurately reflect the Company’s position on
these allowances.

9.                                      Please
explain to us how your current presentation of deferred tax liabilities as a
single line item within the table at the top of page 63 complies with the
guidance in paragraph 43 of SFAS 109 indicating that you should disclose each
type of difference that gives rise to a significant portion of your deferred
tax liabilities.  Your current
description of these liabilities as “Difference between book and tax basis”
appears overly broad.

The
“Difference between book and tax basis” consists of Depreciation and
Amortization expense of ($57.9) million and LIFO inventory valuation of ($1.9)
million.  The Company will adjust future
filings to disclose each type of difference that gives rise to a significant
portion of its deferred tax liability.

Item 9A. Controls and Procedures,
page 69

Evaluation of Disclosure Controls
and Procedures, page 69

10.                               We note
your disclosure that your disclosure controls and procedures were effective “to
provide reasonable assurance that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms.”
As you have included a portion of the definition of disclosure controls
and procedures in your disclosure, you must include the entire definition.  As such, please confirm and revise future
filings to clarify, if true, that your disclosure controls and procedures are
also designed effective to ensure that information required to be disclosed in
the reports that you file or submit under the Exchange Act is accumulated and
communicated to your management, including your chief executive officer and
chief financial officer, to allow timely decisions regarding required
disclosure.  See Exchange Act Rule 13a-15(e).

In
future filings, the Company will expand its discussion of disclosure controls
and procedures to include the entire definition of disclosure controls and
procedures contained in Exchange Act Rule 13a-15(e). An example of t