What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-13 compared with 2020-05-14 · 267 added, 135 removed, 508 unchanged (44% of the section changed)

5 unchanged sentences

CURRENT ASSETS

Accounts receivable, net of allowances of $4.8 and $4.4 as of March 31, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowances of $5.7 and $4.4 as of June 30, 2020 and December 31, 2019, respectively

Inventories, net

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TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES - NOTE 11

CONTINGENCIES - NOTE 11

STOCKHOLDERS’ EQUITY (DEFICIT)

Common stock, $0.0001 par value, 29,511,359 and 7,300,000 shares issued and outstanding at March 31, 2020 and December 31, 2019

Preferred stock, $0.0001 par value, 1,000,000 authorized and no shares outstanding at June 30, 2020

Common stock, $0.0001 par value, 29,511,359 and 7,300,000 shares issued and outstanding at June 30, 2020 and December 31, 2019

Additional paid-in capital

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TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

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

3 unchanged sentences

Three Months Ended

Six Months Ended

(in millions, except share and per share amounts)

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Total general and administrative expenses

(Loss) income from operations

Income (loss) from operations

Other income (expense)

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Total other income (expense)

Loss before taxes

(Loss) income before taxes

Income tax benefit

Basic and diluted loss per share

Net (loss) income

Basic and diluted (loss) income per share

Basic and diluted weighted average common shares outstanding

3 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY (DEFICIT)

Three Months Ended June 30, 2020

(amounts in millions, except share amounts)

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Equity (Deficit)

Balance at March 31, 2020

Opening deferred tax liabilities under reverse recapitalization

Disgorgement of short swing profits

Repurchases of common stock

Balance at June 30, 2020

Three Months Ended June 30, 2019

(amounts in millions, except share amounts)

Treasury Stock

Stockholder’s

Equity (Deficit)

Balance at March 31, 2019

Balance at June 30, 2019

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

Six Months Ended June 30, 2020

(amounts in millions, except share amounts)

Treasury Stock

Stockholder’s

Equity (Deficit)

Balance at December 31, 2019

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Shares issued upon settlement of equity-linked incentive plan

Disgorgement of short swing profits

Repurchases of common stock

Balance at March 31, 2020

Balance at June 30, 2020

Six Months Ended June 30, 2019

(amounts in millions, except share amounts)

Earnings (Deficit)

Treasury Stock

Stockholder’s

Equity (Deficit)

Balance at December 31, 2018

Balance at March 31, 2019

Balance at June 30, 2019

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(amounts in millions)

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Depreciation and amortization

Amortization of debt discount and debt issuance costs

Inventory obsolescence

Gain on sale of assets

Gain on sale of rental fleets

Gain on sale of rental equipment

Provision for bad debt

Loss on debt extinguishment

Amortization of debt discount and debt issuance costs

(Repayment) accrual of paid-in-kind interest

2 unchanged sentences

Accounts receivable

Proceeds from rental fleets

Proceeds from sale of rental equipment

Prepaid expenses and other assets

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Accounts payable, accrued expenses, customer deposits, and other current liabilities

Deferred revenue

Leases and other liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

INVESTING ACTIVITIES

Proceeds from the sale of assets

Expenditures for rental fleets

Expenditures for rental equipment

Expenditures for property and equipment

Expenditures for acquisitions, net of cash acquired

Net activity on notes and land contract receivable

Net cash used in investing activities

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Equity proceeds from reverse recapitalization, net

Proceeds from disgorgement of short swing profits

Repurchases of common stock

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Alta Industrial Equipment Company, LLC;

Alta Industrial Equipment New York, LLC;

Alta Construction Equipment, LLC;

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Alta Heavy Equipment Services, LLC;

Alta Construction Equipment Florida, LLC.

The Company is engaged in the retail sale, service, and rental of lift trucks and construction equipment in the states of Michigan, Illinois, and Indiana as well as the Northeastern part of the United States and Florida.

Alta Construction Equipment Florida, LLC, and PeakLogix, LLC.

The Company is engaged in the retail sale, service, and rental of lift trucks and construction equipment in the states of Michigan, Illinois, Indiana, Virginia and Florida as well as the Northeastern part of the United States.

Unless the context otherwise requires, the use of the terms “the Company”, “we,” “us,” and “our” in these notes to the unaudited consolidated financial statements refers to Alta Equipment Group Inc.

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The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein.

Operating results for the three months period ended March 31, 2020 is not necessarily indicative of the results that may be expected for the year ending December 31, 2020, and therefore, the results and trends in these interim consolidated financial statements may not be the same for the entire year.

Operating results for the six months ended June 30, 2020 is not necessarily indicative of the results that may be expected for the year ending December 31, 2020, and therefore, the results and trends in these interim consolidated financial statements may not be the same for the entire year.

These interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes in our Registration Statement on Form S-1, filed with the U.S.

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These actions include travel restrictions, local quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to drastically reduce or cease customary operations.

Consistent with the actions taken by governmental authorities, virtually all of our sales and back office operations employees have been working remotely since mid-March in order to reduce the spread of COVID-19.

In addition, the manufacturing operations of a number of the manufacturers that supply us with parts and equipment have been drastically reduced during the course of the COVID-19 pandemic.

COVID-19’s impact on our 2020 financial results will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on our customers and suppliers and the speed with which economic conditions and demand for our products

return to pre-COVID-19 levels.

The Company started to experience reduced business activity around mid-March.

We expect this to continue into April as a result of the shutdowns in the automobile industry.

While we are unable to quantify the full impact at this time, we expect our full year 2020 results to be adversely affected by COVID-19.

The extent of COVID-19’s impact on our future operations and the demand for our products will depend upon, among other things, the duration, spread and intensity of the pandemic and related government responses .

We believe we have sufficient liquidity to fund our operations for at least the next twelve months as we work through the COVID-19 recovery.

If there are significant delays in reopening the economy or the demand for our products and services does not recover as quickly as anticipated, we may take additional actions to further reduce costs and/or seek additional financing.

The Company’s response to the global COVID-19 pandemic has been measured, swift and determined with an emphasis on health and safety, operating costs and liquidity.

Consistent with the actions taken by governmental authorities, virtually all of our sales and back office operations employees began working remotely in mid-March in order to reduce the spread of COVID-19.

Broadly, as the Company was deemed “essential” by state and local governments, our facilities were able to remain open, albeit at reduced capacity during the beginning of the second quarter.

As of June 30, 2020, all of our branches are fully operational although some of our administrative employees continued to work remotely.

Despite the Company remaining operational during the second quarter of

2020, certain segments of our c ustomer base were negatively impacted by COVID-19 and, as such, our revenues were negatively impacted as well.

To mitigate the impact of reduced revenues, the Company implemented various cost savings measures in the second quarter of 2020.

These cost savi ngs measures were temporary in nature and were minimized as increased demand for our products and services returned toward the end of the quarter.

COVID-19’s impact on our second-half 2020 financial results and beyond will depend on future developments, such as the duration and scope of the outbreak and the potential for future “shelter in place” orders that could impact our employees, customers and suppliers.

Although we’ve seen improvements as a result of the easing of various restrictions, we expect our full year 2020 results to be adversely affected by COVID-19.

We believe we have sufficient liquidity to fund our operations as we work through the COVID-19 recovery.

However, if there are future “shelter in place” orders or similar measures taken in the geographies that we operate in and the demand for our products and services is adversely impacted, we may take additional actions to further reduce costs and/or seek additional financing.

Use of Estimates

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We have instituted various initiatives throughout the company as part of our business continuity programs, and we are working to mitigate risk when disruptions occur.

While we expect this situation to be temporary, any longer-term impact to our business is currently unknown due to the uncertainty around the outbreak’s duration and its broader impact.

While we continue to expect this situation to be temporary, and we believe we have successfully navigated the second quarter of 2020, any longer-term impacts of COVID-19 (or a future pandemic of its nature) is currently difficult to predict with certainty.

The nature of our business requires that we make estimates and assumptions in accordance with GAAP.

These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period.

The COVID-19 outbreak has impacted these estimates and assumptions and will continue to do so.

Our estimates at the end of the first quarter assumed no material impact from the disruptions caused by COVID-19.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts COVID-19 as of March 31, 2020 and through the date of this report.

The COVID-19 outbreak has an impact on the approach to these estimates and assumptions and will continue to do so.

Any increased severity of the COVID outbreak and the related future financial impacts cannot be estimated at this time.

Our estimates at the end of the second quarter assumed no material impact from the disruptions caused by COVID-19.

The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts, inventory and related reserves and the carrying value of goodwill and other long-lived assets.

While there was no a material impact to the Company’s consolidated financial statements as of and for the quarter ended March 31, 2020, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

While there was no material impact to the Company’s consolidated financial statements as of and for the quarter ended June 30, 2020, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Impairment of Long-lived Assets

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When reviewing long-lived assets for impairment, the Company groups long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

After evaluating and weighing all relevant events and circumstances, the Company concluded that it was not necessary to perform an interim impairment test for the long-lived assets as of and for the period ended March 31, 2020.

Pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 350, Intangibles-Goodwill and Other (“ASC 350”), goodwill is recorded as the excess of the consideration transferred plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired.

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a component).

A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component.

The Company’s share price reduction as a result of the ongoing COVID-19 pandemic during the first quarter of 2020, was determined to be a triggering event for impairment testing under ASC 350.

The Company performed an interim quantitative impairment analysis and the fair value of reporting units was determined based on valuati on techniques using the best available information, primarily cash flow projections.

We determined no goodwill impairment exists for the period ended March 31, 2020.

There can be no assurance that anticipated financial results will be achieved.

Future goo dwill impairments could be recognized should economic uncertainty continue and result in a prolonged economic slowdown and a corresponding decline in the fair value of our reporting units.

A component of an operating segment is a reporting unit if the component constitutes a business for which discrete

financial information is available and segment management regularly reviews the operating results of that component.

After evaluating and weighing all relevant events and circumstances, the Company concluded there was no triggering event that constitutes the need to perform a goodwill impairment test for the period ended June 30, 2020.

It should be noted that at March 31, 2020, the Company’s share price reduction as a result of the ongoing COVID-19 pandemic during the first quarter of 2020, was determined to be a triggering event for impairment testing under ASC 350.

The Company performed an interim quantitative impairment analysis and the fair value of reporting units was determined based on valuation techniques using the best available information, primarily cash flow projections.

We determined no goodwill impairment existed for the period ended March 31, 2020.

Offering Costs and Transaction Expenses

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The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of 201,000,000 shares of capital stock, consisting of (i) 200,000,000 shares of common stock, (the “Common Stock”) and (ii) 1,000,000 shares of preferred stock, par value $0.0001 per share.

As of March 31, 2020, no shares of preferred stock issued have been issued.

As of June 30, 2020, no shares of preferred stock issued have been issued.

As a result of the reverse recapitalization, the shares issued to Alta Equipment Holdings, Inc.

shareholders in connection with the transaction are reflected as if they were issued and outstanding beginning on January 1, 2019.

As of March 31, 2020, there were warrants outstanding to acquire 8,668,750 shares of the Company’s Common Stock.

As of June 30, 2020, there were warrants outstanding to acquire 8,668,750 shares of the Company’s Common Stock.

These warrants were issued in connection with the equity infusion related to reverse recapitalization.

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New Accounting Pronouncements

Recent Accounting Pronouncements Adopted in 2020

Fair Value Measurement — Disclosure Framework (Topic 820)

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, modifies, and adds certain disclosure requirements on fair value measurements.

Entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies are required to disclose the range and weighted average used to

develop sig nificant unobservable inputs for Level 3 fair value measurements.

For public companies, this ASU is effective for financial statements issued for annual periods beginning after December 15, 2019, and interim periods within those annual periods, with early adoption permitted.

Entities were permitted to early adopt any eliminated or amended disclosures and delay adoption of the additional disclosure requirements until the effective date.

We adopted this ASU on the effective date of January 1, 2020.

The adopti on of this accounting standard update has not had a material impact on our on our consolidated financial statements and disclosures.

Pronouncements Not Yet Adopted

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This guidance also expands the requirements for lessees to record leases embedded in other arrangements and the required quantitative and qualitative disclosures surrounding leases.

Accounting guidance for

lessors is largely unchanged.

Accounting guidance for lessors is largely unchanged.

The Company is still assessing the impact Topic 842 will have on its future revenue and expenses.

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Different components of the guidance require modified retrospective or prospective adoption.

ASU 2016-13 is effective for the annual reporting period beginning on or after December 15, 2021.

As amended by ASU 2019-10, the ASU 2016-13 is effective for the annual reporting period beginning on or after December 15, 2022.

The Company believes ASU 2016-13 will only have applicability to the Company’s receivables from revenue transactions, or trade receivables, except those arising from rental revenues as ASU 2016-13 does not apply to receivables arising from operating leases.

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Rather, these transactions are accounted for in accordance with ASC 840, Lease Accounting (“Topic 840”).

Lease liability, with respect to the aforementioned sale transactions, represents the net proceeds upon the equipment’s initial transfer.

These amounts, excluding the guaranteed residual value, are recognized into rental revenue on a pro-rata basis over the leased contract period up to the first exercise date of the guarantee.

At March 31, 2020 and December 31, 2019, the total lease liability relating to these various equipment sale transactions amounted to $5.0 million and $5.5 million, respectively.

The Company also recognized a liability for its guarantee to repurchase the equipment at the residual amounts of $11.7 million and $12.5 million as of March 31, 2020 and December 31, 2019, respectively.

The l ease liability, with respect to the aforementioned sale transactions, represents the net proceeds upon the equipment’s initial transfer.

These amounts, excluding the guaranteed residual value, are recognized into rental revenu e on a pro-rata basis over the leased contract period up to the first exercise date of the guarantee.

At June 30 , 2020 and December 31, 2019, the total lease liability relating to these various equipment sale transactions amounted to $ 4.6 million and $ 5.5 million , respectively.

The Company also recognized a liability for its guarantee to repurchase the equipment at the residual amounts of $ 11.

0 million and $ 1 2.

5 million as of June 30 , 2020 and December 31, 2019, respectively.

The Company also enters into various rental agreements whereby owned equipment is leased to customers.

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Rental revenue and revenue attributable to rental conversions, are recognized in “Rental revenue” and “Rental equipment sales” on the Consolidated Statements of Operations, respectively.

The Company also enters into contracts with customer where it provides automated equipment installation and system integration services.

Revenue from the installation services are recognized over time as the performance obligation is satisfied, determined by the percentage of completion or input method, measured by the percentage of costs incurred to the estimated total costs for each contract.

Deferred Revenue

The Company recognizes deferred revenue with respect to service sales, rental agreements and automated equipment installation and system integration services.

Deferred revenue with respect to service sales represents the unearned portion of fees related to guaranteed maintenance contracts for customers covering equipment purchased.

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The Company also recognizes deferred revenue related to rental agreements.

Total deferred revenue relating to both service sales agreements and rental agreements as of March 31, 2020 and December 31, 2019 was $5.5 million and $4.7 million, respectively.

Total deferred revenue relating to service sales agreements, rental agreements and automated equipment installation and system integration services as of June 30, 2020 and December 31, 2019 was $10.9 million and $4.7 million, respectively.

Disaggregation of Revenues

The following table summarizes the Company’s revenues as presented in the Consolidated Statement of Operations for the period ended March 31, 2020 and 2019 by revenue type, and by the applicable accounting standard.

The following table summarizes the Company’s disaggregated revenues as presented in the Consolidated Statement of Operations for the three months and six months ended June 30, 2020 and 2019 by revenue type, and by the applicable accounting standard.

Three months ended

March 31, 2020

June 30, 2020

Three months ended

March 31, 2019

Consolidated Statement of Operations

June 30, 2019

New and used equipment sales

2 unchanged sentences

Rental equipment sales

Six months ended

June 30, 2020

Six months ended

June 30, 2019

New and used equipment sales

Service revenue

Rental revenue

Rental equipment sales

The Company believes that the disaggregation of revenues from contracts to customers as summarized above, together with the discussion below, depicts how the nature, amount, timing and uncertainty of its revenues and cash flows are affected by economic factors.

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The Company does not offer material rights of return.

The Company recognized $0.5 million in revenues for the year-to-date period ended June 30, 2020 from automated equipment installation and system integration services as performance obligation was satisfied over time using the cost-to-cost input method, based on contract costs incurred to date to total estimated contract costs.

Revenues from the sale of parts are recognized at the time of pick-up by the customer for over the counter sales transactions.

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The Company recognizes guaranteed maintenance service revenues over-time using an input method of costs incurred to estimated costs over the life of the related contract.

Revenue recognized from guaranteed maintenance contracts totaled $4.0 million and $3.5 million for the period ended March 31, 2020 and 2019, respectively.

Revenue recognized from guaranteed maintenance contracts totaled $7.8 million and $7.2 million for the year-to-date period ended June 30, 2020 and 2019, respectively.

The Company also records service revenue from warranty contracts whereby the Company performs service on behalf of the Original Equipment Manufacturer (“OEM”) or third-party warranty provider.

Rental equipment sales:

Certain rental agreements contain a rental purchase option, whereby the customer has an option to purchase the rented equipment during the term of the rental agreement.

The Company also sells rental equipment from our rental fleet, these sales are recognized at the time of delivery to, or pick-up by, the customer, which is when the customer obtains control of the promised good.

In some cases, certain rental agreements contain a rental purchase option, whereby the customer has an option to purchase the rented equipment during the term of the rental agreement.

Revenues from the sale of rental equipment are recognized at the time the rental purchase option agreement has been approved and signed by both parties, as the equipment is already in the customer’s possession under the previous rental agreement, and therefore control has been transferred as title has been transferred.

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The Company does not recognize assets associated with the incremental costs of obtaining a contract with a customer that the Company expects to recover (for example, a sales commission).

Most of the Company’s revenue is recognized at a point in time or over a period of one year or less, and the Company has used the practical expedient that allows it to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.

obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.

The amount of the costs associated with the revenue recognized over a period of greater than one year is insignificant.

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NOTE 4 — RELATED PARTY TRANSACTIONS

The Company leases 17 out of its 43 operating facilities from three related party real estate entities related through common ownership.

Total rent expense under these lease agreements for both the three months ended March 31, 2020 and March 31, 2019 was $1.3 million.

The Company leases a subset of its operating facilities from three real estate entities related through common ownership.

Total rent expense under these lease agreements for both the six months ended June 30, 2020 and June 30, 2019 was $2.4 million and for both the three months ended June 30, 2020 and June 30, 2019 was $1.1 million.

NOTE 5 — INVENTORIES

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Inventory reserve

Direct labor of $1.3 million and $1.2 million incurred for open service orders were capitalized and included in work in process at both March 31, 2020 and December 31, 2019.

The remaining work in process balances as of March 31, 2020 and December 31, 2019 primarily represent parts applied to open service orders.

NOTE 6 — PROPERTY AND EQUIPMENT

Direct labor of $1.3 million and $1.2 million incurred for open service orders were capitalized and included in work in process at both June 30, 2020 and December 31, 2019.

The remaining work in process balances as of June 30, 2020 and December 31, 2019 primarily represent parts applied to open service orders.

NOTE 6 — PROPER TY AND EQUIPMENT

Property and equipment, net, consisted of the following (amounts in millions):

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Total accumulated depreciation and amortization

Total depreciation and amortization on property and equipment was $13.8 million and $9.1 million for the three months ended March 31, 2020 and 2019, respectively.

Total depreciation and amortization on property and equipment was $28.4 million and $19.2 million for the six months ended June 30, 2020 and 2019 and $14.6 million and $10.1 million for the three months ended June 30, 2020 and 2019, respectively.

The Company had assets related to capital leases, which are included in the machinery and equipment balance above.

Such assets had gross carrying values totaling $3.9 million and $3.5 million, and accumulated amortization balances totaling $1.6 million and $1.3 million, as of March 31, 2020 and December 31, 2019, respectively.

Of the $350.8 million and $285.1 million of rental fleet, $17.3 million and $18.4 million were represented by GPO assets as of March 31, 2020 and December 31, 2019, respectively.

Such assets had gross carrying values totaling $3.9 million and $3.5 million, and accumulated amortization balances totaling $1.9 million and $1.3 million, as of June 30, 2020 and December 31, 2019, respectively.

Of the $377.7 million and $285.1 million of gross cost of rental fleet, $16.3 million and $18.4 million were represented by GPO assets as of June 30, 2020 and December 31, 2019, respectively.

NOTE 7 — GOODWILL

The following table summarizes the changes in the carrying amount of goodwill in total and by reportable segment as of March 31, 2020 and December 31, 2019 (amounts in millions):

The following table summarizes the changes in the carrying amount of goodwill in total and by reportable segment as of June 30, 2020 and December 31, 2019 (amounts in millions):

Balance, December 31, 2019

Balance, March 31, 2020

Balance, June 30, 2020

See Note 14, Business Combinations for further information.

NOTE 8 — INTANGIBLE ASSETS

The gross carrying amount of intangible assets and accumulated amortization as of March 31, 2020 and December 31, 2019 were as follows (amounts in millions):

March 31, 2020

The gross carrying amount of intangible assets and accumulated amortization as of June 30, 2020 and December 31, 2019 were as follows (amounts in millions):

June 30, 2020

December 31, 2019

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Non-compete agreements

Amortization of intangible assets during each of the three months ended March 31, 2020 and March 31, 2019 was approximately $0.1 million and $0.0 million, respectively.

The Company reviewed its finite-lived intangible assets for impairment and determined that none of the assets were impaired as of March 31, 2020.

Amortization of intangible ass ets were $0.

6 million and $ 0.

7 million for the three and six months ended June 30, 2020 and $0.

0 million and $ 0.

1 million for the three and six months ended June 30, 2019 , respectively .

The Company concluded there was no triggering event that constitutes the need to perform a finite-lived intangible assets for impairment for the period ended June 30, 2020.

NOTE 9 — LINES OF CREDIT AND FLOOR PLANS

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The ABL Facility has a maximum borrowing capacity of $300 million and interest cost is the London Interbank Offered Rate (“LIBOR”) plus an applicable margin or the CB Floating Rate, depending on the borrowing.

As of March 31, 2020, the Company had an outstanding ABL Facility balance of $133.4 million, excluding unamortized debt issuance costs.

The effective interest rate was 2.8% at March 31, 2020.

As of June 30, 2020, the Company had an outstanding ABL Facility balance of $110.8 million, excluding unamortized debt issuance costs.

The effective interest rate was 2.0% at June 30, 2020.

The Company has Floor Plan Facility with its first lien lender to finance new and used inventory and rental fleet equipment.

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The interest cost for the first lien lender floor plan facility is LIBOR plus an applicable margin.

The effective interest rate at March 31, 2020 was 4.3%.

The effective interest rate at June 30, 2020 was 2.9%.

The floor plan is collateralized by substantially all assets of the Company.

As of March 31, 2020, the Company had an outstanding balance on their first lien lender floor plan facility of $33.9 million, excluding unamortized debt issuance costs.

As of June 30, 2020, the Company had an outstanding balance on their first lien lender floor plan facility of $29.0 million, excluding unamortized debt issuance costs.

In relation to information regarding to our former line of credit and floor plans as of December 31, 2019, please refer to the “Lines of Credit and Floor Plans” footnote in our Registration Statement on Form S-1, filed with the SEC on March 25, 2020.

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When this occurs, the related OEM captive lender floor plan payable becomes due to be paid at the time the equipment being financed is sold.

With the acquisitions of Liftech Equipment Companies, Inc.

(“Liftech”) and FlaglerCE Holdings, LLC (“Flagler”), the Company’s floor plan financing facilities with its OEM capital lenders and suppliers were amended to include the new locations and new entity, Alta Construction Equipment Florida, LLC.

With the recent acquisitions, the Company’s floor plan financing facilities with its OEM capital lenders and suppliers were amended to include the new locations and new entities.

The floor plan financing facilities are secured by the equipment being financed, and contain operating company guarantees.

The interest is LIBOR plus an applicable margin.

The effective rates, excluding the favorable effect of interest-subsidies, as of March 31, 2020 ranged from 4.5% to 5.5%.

As of March 31, 2020, the Company had an outstanding balance on these floor plans of $128.7 million.

The effective rates, excluding the favorable effect of interest-subsidies, as of June 30, 2020 ranged from 3.1% to 4.2%.

As of June 30, 2020, the Company had an outstanding balance on these floor plans of $136.1 million.

The total aggregate amount of indebtedness related to floor plan financing activities (including the first lien lender floor plan) facility cannot exceed $225.0 million at any time.

Total borrowings related to floorplan financing activities as of March 31, 2020 was $162.6 million excluding unamortized debt issuance costs.

For the three months ended March 31, 2020 the Company recognized interest expense associated with new equipment financed under its floor plan facilities of $1.0 million.

Total borrowings related to floorplan financing as of June 30, 2020 was

1 million excluding unamortized debt issuance costs.

For the six months ended and three months ended June 3 0 , 2020 the Company recognized interest expense associated with new equipment financed under its floor plan facilities of $1.

3 million and $0.3 million .

Maximum borrowings under the floor plans and ABL Facility are limited to $525 million.

The total amount outstanding as of March 31, 2020 was $296.0, exclusive of debt issuance and deferred financings costs of $1.6 million.

The total amount outstanding as of June 30, 2020 was $275.9 million, exclusive of debt issuance and deferred financings costs of $1.6 million.

NOTE 10 — LONG-TERM DEBT

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In connection with the December 27, 2017 note, warrants were issued enabling the purchase of 25% of the common units outstanding on a fully diluted basis at $0.01 per warrant unit.

On February 14, 2020, in connection with the reverse recapitalization and in conjunction with entering into the Amended and Restated Credit Agreement and Term Loan, the Co mpany repaid this note payable in full, completely discharging the Company of any obligations to the lender .

On February 14, 2020, in connection with the reverse recapitalization and in conjunction with entering into the Amended and Restated Credit Agreement and Term Loan, the Company repaid this note payable in full, completely discharging the Company of any obligations to the lender .

Subordinated Debt

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On February 14, 2020, in connection with the reverse recapitalization, and i n conjunction with entering into the Amended and Restated Credit Agreement and Term Loan, the Company repaid in full the subordinated debt to the former shareholders of Alta Equipment Company and terminated all commitments and discharged all guarantees related to those agreements.

As of March 31, 2020, the Company no longer has subordinated debt on its Consolidated Balance Sheet.

As of June 30, 2020, the Company has no subordinated debt on its Consolidated Balance Sheet.

On February 14, 2020, the Company entered into a Note Purchase Agreement which comprised of a term loan in an aggregate principal amount of $155.0 million with its second priority lien lender through syndication, with an initial maturity date of August 2025.

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The term loan is payable, at the lender’s option, in quarterly installments of $1.9 million plus interest at LIBOR plus 8%.

As of March 31, 2020, the effective interest rate was 9.8%.

As of June 30, 2020, the effective interest rate was 9.8%.

The Term loan is collateralized by substantially all assets of the Company.

As of March 31, 2020, outstanding borrowings under the term loan were $147.3 million, which included $7.7 million deferred financing costs and original issue discounts at 3.5%.

As of June 30, 2020, outstanding borrowings under the term loan were $145.7 million, which included $7.4 million deferred financing costs and original issue discounts.

Notes Payable — OEM Captive Lender

On May 9, 2014, the Company entered into a Master Note Agreement with an OEM captive lender.

These notes were payable in monthly installments, with interest ranging from 3.29% to 4.99%.

The notes were secured by the specific assets financed and were to mature at various dates through October 2024.

These notes were payable in

monthly installments, with interest ranging from 3.29% to 4.99%.

The notes we re secured by the specific assets financed and were to mat ure at various dates through October 2024.

On February 14, 2020, in connection with the reverse recapitalization, the Company repaid in full the balance of the notes payable to the OEM captive lender.

As of March 31, 2020, there were no notes payable to an OEM captive lender on our Consolidated Balance Sheet.

As of June 30, 2020, there were no notes payable to an OEM captive lender on our Consolidated Balance Sheet.

Extinguishment of Debt

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The remaining balance represented the write off of deferred financing fees related to the extinguishment of these debt facilities.

The Company’s long-term debt consists of the followin g (amounts in millions):

The Company’s long-term debt consists of the following (amounts in millions):

Senior lien holder

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Long-term debt, net

As of March 31, 2020, the Company was in compliance with the financial covenants set forth in its debt agreements.

As of June 30, 2020, the Company was in compliance with the financial covenants set forth in its debt agreements.

Promissory Note

On June 12, 2020, the Company acquired PeakLogix.

As part of this acquisition agreement, the Company incurred a $1.0 million unsecured one-year promissory note at an interest rate of 6.0% on the unpaid principal sum.

Due to the short-term nature of the note, this liability was included in “Other current liabilities” on the Consolidated Balance Sheet as of June 30, 2020.

NOTE 11 — CONTINGENCIES

As of March 31, 2020, and December 31, 2019, the Company was party to certain contracts in which it guarantees the performance of agreements between various third-party financial institutions.

As of June 30, 2020, and December 31, 2019, the Company was party to certain contracts in which it guarantees the performance of agreements between various third-party financial institutions.

The terms of the guarantees range from three to five years.

In the event of a default by a third-party lessee, the Company would be required to pay all or a portion of the remaining unpaid obligations as specified in the contract.

The estimated exposure related to these guarantees was $2.9 million and $3.3 million at March 31, 2020 and December 31, 2019, respectively.

The estimated exposure related to these guarantees was $2.5 million and $3.3 million at June 30, 2020 and December 31, 2019, respectively.

It is anticipated that the third parties will have the ability to repay the debt without the Company having to honor the guarantee;

therefore, no amount has been accrued on the Consolidated Balance Sheets at March 31, 2020 and December 31, 2019.

therefore, no amount has been accrued on the Consolidated Balance Sheets at June 30, 2020 and December 31, 2019.

Legal Proceedings

During the three months ended March 31, 2020 and March 31, 2019, various claims and lawsuits, incidental to the ordinary course of business, were pending against the Company.

During the six months ended June 30, 2020 and June 30, 2019, various claims and lawsuits, incidental to the ordinary course of business, were pending against the Company.

In the opinion of management, after consultation with legal counsel, resolution of these matters is not expected to have a material effect on the Company’s consolidated financial statements.

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As such, the Company is using the single line item approach.

The income tax benefit for the three months ended March 31, 2020 and 2019 consisted of the following:

The income tax benefit for the three and six months ended June 30, 2020 and 2019 consisted of the following:

Three Months Ended June 30,

Six Months Ended June 30,

Federal taxes-current

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State taxes-deferred

The Company recorded an income tax benefit of $1.1 million and $0 for the three months ended March 31, 2020 and 2019, respectively.

For the period ended March 31, 2019, the Company was not in existence and therefore does not have a comparable period.

The income tax benefit covers the period starting with the reverse rec apitalization on February 14, 2020 through the period ended March 31, 2020.

The Company recorded an income tax benefit of $0.4 million and $0 for the three months ended June 30, 2020 and 2019, income tax benefit of $1.5 million and $0 for the six months ended June 30, 2020 and 2019 respectively.

For the period ended June 30, 2019, the Company was not in existence and therefore does not have a comparable period.

The income tax benefit covers the period starting with the reverse recapitalization on February 14, 2020 through the period ended June 30, 2020.

The income tax results from the period January 1, 2020 through the day prior to the reverse recapitalization will be recognized by the predecessor.

The income tax benefit of $1.1 million for the three months ended March 31, 2020 was primarily driven by the level of pre-tax loss of $4.1 million for the period from February 1 4 , 2020 to March 31, 2020.

The effective income tax rate for the period from February 1 4 , 2020 to March 31, 2 020 of 25.7 % was affected by non-deductible expenses and state income taxes.

As of March 31, 2020, the Company had $5.8 million of net deferred tax liabilities.

The income tax benefit of $0.4 million and $1.5 for the three months and six months ended June 30, 2020, respectively, was primarily driven by the level of pre-tax loss of $6.8 million for the period from February 14, 2020 to June 30, 2020.

The effective income tax rate for the period from February 14, 2020 to June 30, 2020 of 22.7% was affected by non-deductible expenses and state income taxes.

As of June 30, 2020, the Company had $17.4 million of net deferred tax liabilities.

As discussed above, this represents the GAAP to tax difference in the basis of the underlying partnership, Alta Enterprises, LLC.

This basis difference mirrors the GAAP to tax differences within the partnership, which primarily relate to property and equipment assets and other temporary items where the tax basis differs from the GAAP carrying amounts.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other thing s, includes various income and payroll tax provisions, modifications to federal net operating loss rules, business interest deduction limitations, and bonus depreciation eligibility for qualified improvement property.

At this time, we plan to take advantage of both the payroll tax deferral and the employee retention credit.

We are currently evaluating the full impact of these provisions and recent IRS guidance, but note that any portion of accrued payroll tax not paid out by December 31, 2020 may not be deductible for income tax purposes in 2020.

Further evaluation is required to determine the current year impact.

With regard to the Employee Retention Credit, as this only impacts payroll taxes which are recorded in pre-tax income, there would be no impact on the income tax provision.

NOTE 13 — FAIR VALUE INSTRUMENTS

The carrying value of financial instruments reported in the accompanying Consolidated Balance Sheets for cash, accounts receivable, accounts payable and accrued expenses payable and other liabilities approximate fair value due to the immediate or short-term nature or maturity of these financial instruments.

Based upon current borrowing rates with similar maturities, which are Level 2 fair value inputs, the carrying value of lines of credit, long-term debt, and the guaranteed purchase obligations approximates the fair value as of March 31, 2020 and December 31, 2019.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis:

The Company granted warrants to purchase 33,333.33 shares of common units in connection with the stock purchase and redemption that occurred on December 27, 2017.

The warrants had an exercise price of $0.01 and included a conditional put option, allowing the holder to require the Company to purchase the outstanding warrants, via a settlement upon the following events:

(1) upon 75% repayment of senior indebtedness, (2) change in control from a sale transaction, and (3) the maturity of the related debt, which require the Company to settle the warrants in cash.

The warrants had an exercise price of $0.01 and included a conditional put option, allowing the holder to require the Company to purch ase the outstanding warrants, via a settlement upon the following events:

(1) upon 75% repayment of senior indebtedness, (2) change in control from a sale transaction, and (3) the maturity of the related debt, which require d the Company to settle the warra nts in cash.

The warrants were to expire December 27, 2027.

The warrants also included a limited call right, where in the event of a sale transaction, the Company had the right to redeem, in cash, all the warrants simultaneously at a per common share price equal to the per unit set for the sale transaction.

The warrants also included a limited call right, where in the event of a sale transaction, the Company had the right to redeem , in cash, all the warrants simultaneously at the per common share pri ce equal to the price set for the sale transaction.

On February 14, 2020, the Company consummated its reverse recapitalization.

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To derive equity value, interest-bearing debt was removed.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

Furthermore, although management believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The Company redeemed all the warrants outstanding at December 31, 2019 upon closing of the reverse recapitalization on February 14, 2020 and as of March 31, 2020, there were no warrant liabilities on the Consolidated Balance Sheet.

The preceding methods described produced a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

Furthermore, although management believed its valuation methods to be appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could have resulted in a different fair value measurement at the reporting date.

The Company redeemed all the warrants outstanding upon closing of the reverse recapitalization on February 14, 2020 and as of June 30, 2020, there were no warrant liabilities on the Consolidated Balance Sheet.

The purchase agreement for the PeakLogix acquisition provides for earn-out payments of a minimum of $2.0 million up to $3.7 million which can be earned through June 30, 2025 based on meeting certain financial targets .

The initial earn-out liability was recorded at net present value based on a probability weighted range of outcomes analysis.

This analysis considered the earn-out payment thresholds, the minimum and maximum range of earn-out payments per the agreement and the expected future cash flows of PeakLogix.

The earn-out will be remeasured at each balance sheet date using this approach and any resulting increase or decrease will be reflected in the income statement.

Going forward, volatility in the amount of PeakLogix’s actual results and forecasted scenarios could impact the fair value of this contingent consideration.

The contingent consideration liability represents the fair value of the future earn-out liability that the Company may be required to pay in conjunction with the acquisition of PeakLogix.

The following table sets forth, by level of hierarchy, the provisional fair value of contingent liability for the earn-out consideration at net present value as of June 30, 2020, which was presented in “Other liabilities” on the Consolidated Balance Sheet:

June 30, 2020

Contingent consideration

NOTE 14 — BUSINESS COMBINATIONS

On February 14, 2020, in connection with the reverse recapitalization, the Company consummated its acquisition of Flagler for a total purchase price of $74.6 million, which was paid out of funds from the closing of the reverse recapitalization.

On June 12, 2020, the Company acquired all the assets of PeakLogix for a total purchase cash consideration of $5.7 million, which was paid out of available funds.

Additional consideration includes $1.0 million in an unsecured one-year promissory note at 6% and earn-out payment of a minimum $2.0 million up to a cap of $3.7 million to be paid out to former owners based on meeting certain financial targets through-out 5-year earn-out period.

In connection with the purchase, PeakLogix LLC was created.

The estimated fair values of assets acquired, and liabilities assumed are provisional and are based on the information that was available as of the balance sheet date.

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Accounts Receivable

Property and equipment

Accounts payable

Accrued expenses

Other current liabilities

Total Liabilities

Net Assets Acquired

Assets acquired net of cash

The following table summarizes the components of the purchase price at 6/12/2020:

Cash consideration paid

Promissory Note

Earn-out liability

Total purchase price

On February 14, 2020, in connection with the reverse recapitalization, the Company consummated its acquisition of Flagler for a total purchase price of $75.8 million, which was paid out of funds from the closing of the reverse recapitalization.

T he acquisition has been accounted for as a purchase business combination.

Under the purchase method of accounting, the fair value of the assets acquired, and liabilities assumed have been recorded at the acquisition date of acquisition in our consolidated financial statements and may be subject to adjustment pending completion of final valuation.

The fair value of accounts receivable was determined based on the acquisition date net book value and an evaluation of amounts deemed recoverable through subsequent collection.

The fair value of inventory and property, plant, and equipment were estimated to approximate their respective acquisition date net book values.

The Company expects the goodwill recognized to be 100% deductible for income tax purposes.

Costs and expenses related to the acquisition have been expensed as incurred in operating expenses.

The following table summarizes the net assets acquired from the acquisition (amounts in millions ):

Accounts Receivable

Prepaid and other assets

Property and equipment

Intangible Assets

Floor plan payable

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Accrued expenses

Other long term liabilities

Other liabilities

Total Liabilities

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Assets acquired net of cash

On February 14, 2020, in connection with the reverse recapitalization, the Company consummated its acquisition of Liftech for a total purchase price of $17.5 million, which was paid out of funds from the closing of the reverse recapitalization.

The estimated fair values of assets acquired, and liabilities assumed are provisional and are based on the information that was available as of the balance sheet date.

The Company expects to finalize the valuation and complete the purchase price allocation as soon as practical but no later than one year from the acquisition date.

It should be further noted that, upon the acquisition’s close, the Company established additional floorplan borrowings for new equipment on its Floor Plan Facility with its first lien lender in the amount of $1.2 million.

On February 14, 2020, in connection with the reverse recapitalization, the Company consummated its acquisition of Liftech for a total purchase price of $18.4 million adjusted for the $1.5 million working capital, which was paid out of funds from the closing of the reverse recapitalization.

The $1.5 million working capital will be settled in the third quarter of 2020.

T he acquisition has been accounted for as a purchase business combination.

Under the purchase method of accounting, the fair value of the assets acquired, and liabilities assumed have been recorded at the acquisition date in our consolidated financial statements and may be subject to adjustment pending completion of final valuation.

The fair value of accounts receivable was determined based on the acquisition date net book value and an evaluation of amounts deemed recoverable through subsequent collection.

The fair value of inventory and property, plant, and equipment were estimated to approximate their respective acquisition date net book values.

The Company expects the goodwill recognized to be 100% deductible for income tax purposes.

Costs and expenses related to the acquisition have been expensed as incurred in operating expenses.

The following table summarizes the net assets acquired from the acquisition (amounts in millions):

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Property, plant, and equipment

Intangible Assets

Floor plan payable

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Net Assets Acquired

Northland Industrial Truck Co., Inc.

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Under the purchase method of accounting, the assets and liabilities assumed are recorded at the date of acquisition at their respective fair values.

The fair value of accounts receivable was determined based on amounts considered recoverable through subsequent collection.

The fair value of accounts receivable was determined based on the acquisition date net book value and an evaluation of amounts deemed recoverable through subsequent collection.

The fair value of inventory and property, plant, and equipment were estimated to approximate their respective acquisition date net book values.

Costs and expenses related to the acquisition have been expensed as incurred in operating expenses.

Total acquisition costs expensed were approximately $0.3 million.

The following table summarizes the net assets acquired from the acquisition (amounts in millions):

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Since the Flagler acquisition was completed in the period ended March 31, 2020, the pro forma information below gives effect to the Flagler acquisition as if the acquisition occurred on January 1, 2020.

For the three months ended March 31, 2020

(amounts in millions)

6 Months ended June 30, 2020

Total revenues

Net income (loss)

Net (loss) income

Pro forma financial information

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The Company, for this presentation, prorated NITCO pro forma financial information presented in our Registration Statement on Form S-1, filed with the SEC on March 25, 2020.

For the three months ended March 31, 2019

(amounts in millions)

6 Months ended June 30, 2019

3 Months ended June 30, 2019

Total revenues

Net income (loss)

The Liftech acquisition was not deemed material for proforma financial information disclosure.

Net (loss) income

The Liftech and PeakLogix acquisitions were not deemed material for proforma financial information disclosure.

NOTE 15 — SEGMENTS

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The operating results for each segment are reported separately to the Company’s Chief Executive Officer to make decisions regarding the allocation of resources, to assess the Company’s operating performance and to make strategic decisions.

The Industrial Equipment segment is principally engaged in operations related to the sale, service, and rental of lift trucks in Michigan, Illinois, and Indiana, as well as parts of the northeastern United States.

The Industrial Equipment segment is principally engaged in operations related to the sale, service, and rental of lift trucks in Michigan, Illinois, Indiana and New York, as well as parts of the northeastern United States.

As of June 12, 2020, the Industrial Equipment segment also includes PeakLogix.

The Construction Equipment segment is principally engaged in operations related to the sale, service, and rental of construction equipment in Michigan, Illinois and Florida.

The Construction Equipment segment is principally engaged in operations related to the sale, service, and rental of construction equipment in Michigan and Illinois.

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Corporate holds corporate debt and has minor activity all together.

For the quarter ended March 31, 2020, Corporate incurred $7.6 million in debt extinguishment fees, $7.6 million in transaction costs and other expenses associated with the reverse recapitalization.

The following table presents the Company’s results of operations by reportable segment for the three months ended March 31, 2020 (amounts in millions):

During the first quarter 0f 2020, Corporate incurred $7.6 million in debt extinguishment fees, $7.6 million in transaction costs and other expenses associated with the reverse recapitalization.

During the second quarter of 2020, Corporate primarily incurred expenses associated with consulting and legal fees, acquisition costs and interest expense.

The following table presents the Company’s results of operations by reportable segment for the six months ended June 30, 2020 (amounts in millions):

New and used equipment sales

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Net income (loss)

The following table presents the Company’s results of operations by reportable segment for the three months ended March 31, 2019 (amounts in millions):

The following table presents the Company’s results of operations by reportable segment for the three months ended June 30, 2020 (amounts in millions):

New and used equipment sales

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Net income (loss)

The following table presents the Company’s identified assets by reportable segment for the three months ended March 31, 20 20 and the year ended December 31, 201 9 (amounts in millions):

The following table presents the Company’s results of operations by reportable segment for the six months ended June 30, 2019 (amounts in millions):

New and used equipment sales

Service revenue

Rental revenue

Rental equipment sales

Total revenue

Interest expense

Depreciation and amortization

Net income (loss)

The following table presents the Company’s results of operations by reportable segment for the three months ended June 30, 2019 (amounts in millions):

New and used equipment sales

Service revenue

Rental revenue

Rental equipment sales

Total revenue

Interest expense

Depreciation and amortization

Net income (loss)

The following table presents the Company’s identified assets by reportable segment for the period ending June 3 0 , 20 20 and December 31, 201 9 (amounts in millions):

Segment assets:

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NOTE 16 — SUBSEQUENT EVENTS

In late March 2020, in compliance with the directives of government authorities in the state and local geographic areas in which we have operations, we adjusted our operations to permit virtually all of our sales and back office employees to work remotely.

In response to the expected economic impact of the COVID-19 pandemic, our senior executive officers volunteered to accept pay reductions, we implemented an employee furlough program and have taken various other cost savings measures to prioritize preserving our liquidity position during these uncertain times until our customers are able to resume and sustain more normalized business operations.

Although we have been deemed an “essential” business in all of our geographies, COVID-19’s impact on our 2020 financial results will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on our customers and suppliers and the speed with which economic conditions and demand for our products and service offerings return to pre-COVID-19 levels.

While we are unable to quantify the impact at this time, we expect our full year 2020 results to be adversely affected by COVID-19.

On July 1, 2020, the Company closed its acquisition of Hilo Equipment & Services, distributor of material handling equipment with three branches in the New York City metro area.

Under the terms of the agreement, the purchase price at close was $17.3 million in cash and potential earn out payments tied to post closing performance of the Hilo business.

On July 31, 2020, the Company announced its entry into a definitive agreement to acquire Martin Implement Sales, Inc., a privately held premium distributor of construction and agricultural equipment in the greater Chicago area.

The acquisition is expected to close during the third quarter of 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements