ALTA EQUIPMENT GROUP INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with our interim unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. This discussion contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 reflecting Alta’s current expectations, estimates and assumptions concerning events and financial trends that may affect its future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward- looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. Alta assumes no obligation to update any of these forward-looking statements. Recent Developments COVID-19 The economic volatility and disruptions caused by the COVID-19 pandemic caused an adverse effect on our business and our financial results in 2020. Our business activity levels, with the exception of rental utilization in certain geographies, stabilized in the third quarter of 2020 to near pre-COVID levels, and since that time have generally held at or, in certain geographies, went beyond pre-COVID levels. Currently, our business is experiencing “recovery-related” supply-chain constraints that have affected some of our OEM equipment suppliers. Specifically, lead-times from OEMs for new equipment has been pushed beyond historic norms. While we believe our diversified cash flow streams, the breadth of our product portfolio, geographic reach and our ability to source used equipment will help mitigate the impact of the current supply-chain disruptions we are facing, an extended period or worsening of the supply chain issues our OEM equipment providers are experiencing could impact our financial results adversely. Although based on current business levels we believe the worst of the pandemic’s effect on our business to be behind us, uncertainty remains regarding emerging variant strains of COVID-19 and how long it will take for the COVID-19 pandemic to subside, including how quickly and completely vaccines will be broadly administered in the United States and the rest of the world, and the effectiveness of such vaccines in reducing the spread of COVID-19. While our operations in the second quarter of 2021, in general, performed at, or beyond, pre-COVID levels, we will continue to monitor key performance metrics such as labor hour demand and rental utilization and, in-turn, rationalize our skilled labor and rental fleet levels to match expected demand for the remainder of 2021 and through the end of COVID-19 pandemic. We believe that the acquisitions and investments made in the calendar year 2020 and in the first quarter of 2021, expanded our service capabilities, geographic reach, end market diversification and product offerings; each of which will ultimately strengthen our resiliency to economic shocks and will help to preserve liquidity over the long term. Exchange of Warrants On April 12, 2021, we exchanged all 8,668,746 of our outstanding warrants into shares of our common stock at an exchange ratio of 0.263 shares of common stock per warrant, for an aggregate issuance of approximately 2,279,874 shares of common stock in the exchange. Issuance of 5.625% Senior Secured Second Lien Notes due 2026 On April 1, 2021, we completed a private offering of $315 million of our 5.625% Senior Secured Second Lien Notes due 2026 (the “Notes”). The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended, pursuant to a purchase agreement among the Company, the guarantors party thereto (the “Guarantors”) and J.P. Morgan Securities LLC, as representative of the initial purchasers. The Notes are guaranteed by the Guarantors (the “Guarantees” and, together with the Notes, the “Securities”) on a second lien, senior secured basis. The Notes are guaranteed by each of our existing and future domestic subsidiaries that becomes a borrower or guarantor under our or the Guarantors’ indebtedness, including the Credit Agreements (as defined below), amended and restated concurrently with the closing of the Notes offering. The Notes and the Guarantees are secured, subject to certain exceptions and permitted liens, by second-priority liens on substantially all of our assets and the assets of the Guarantors that secure on a first-priority basis all of the indebtedness under our ABL Facility (as defined below) and the First Lien Floor Plan Facility (as defined below) and certain hedging and cash management obligations, including, but not limited to, equipment, fixtures, inventory, intangibles and capital stock of our restricted subsidiaries now owned or acquired in the future by us or the Guarantors. 28 The Notes were issued pursuant to an indenture dated April 1, 2021 (the “Indenture”), among us, the Guarantors and Wilmington Trust, National Association, as trustee and as collateral agent. The Notes will bear interest at the rate of 5.625% per annum and will mature on April 15, 2026. Interest on the Notes is payable in cash on April 15 and October 15 of each year, beginning on October 15, 2021. Amended and Restated Credit Arrangements On April 1, 2021, in connection with the offering of the Notes, we entered into: (i) a Sixth Amended and Restated ABL First Lien Credit Agreement, dated April 1, 2021, among us, our subsidiaries, JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders who are parties to the agreement (the “ABL Credit Agreement” and the facility thereunder, the “ABL Facility”); and (ii) a Sixth Amended and Restated Floor Plan First Lien Credit Agreement among us, certain of our subsidiaries, JPMorgan Chase Bank, N.A., as Administrative Agent and the lenders who are parties to the agreement (the “Floor Plan Credit Agreement” and the facility thereunder, the “First Lien Floor Plan Facility”). The ABL Facility is an asset-based revolving loan facility that provides for borrowings of up to the lesser of $350 million or the borrowing base, in each case, less outstanding loans and letters of credit. The ABL Facility has a maturity date of the earlier of (a) April 1, 2026, or (b) December 1, 2025 if the Notes remain outstanding on December 1, 2025. The Floor Plan Facility is an asset-based revolving loan facility related to the floor plan equipment that provides for borrowings of up to $40 million. The Floor Plan Facility has an expiration date of the earlier of (a) April 1, 2026, or (b) December 1, 2025 if the Notes remain outstanding on December 1, 2025. Forward-Looking Statements This Form 10-Q contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of federal securities laws, and are based on our current expectations and assumptions. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements are not intended to guaranty future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as: • the impact of the COVID-19 outbreak or future epidemics on our business, including the potential for facility closures or work stoppages, supply chain disruptions, negative impacts on customer payment policies and adverse banking and governmental regulations, resulting in a potential reduction to the fair value of our assets; • federal, state, and local budget uncertainty, especially as it relates to infrastructure projects; • the performance and financial viability of key suppliers, contractors, customers, and financing sources; • economic, industry, business and political conditions including their effects on governmental policy and government actions that disrupt our supply chain or sales channels; • our success in identifying acquisition targets and integrating acquisitions; • our success in expanding into and doing business in additional markets; • our ability to raise capital at favorable terms; • the competitive environment for our products and services; • our ability to continue to innovate and develop new business lines; • our ability to attract and retain key personnel, including, but not limited to, skilled technicians; • our ability to maintain our listing on the New York Stock Exchange; • the impact of cyber or other security threats or other disruptions to our businesses; and • our ability to realize the anticipated benefits of acquisitions or divestitures, rental fleet investments or internal reorganizations . 29 These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see our filings with the SEC including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, our Quarterly Report on form 10-Q for the first quarter of 2021 and in this Quarterly Report on Form 10-Q. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. Business Description The Company owns and operates one of the largest integrated equipment dealership platforms in the U.S. Through our branch network, we sell, rent, and provide parts and service support for several categories of specialized equipment, including lift trucks and aerial work platforms, cranes, earthmoving equipment and other Material Handling and Construction Equipment. We engage in five principal business activities in these equipment categories: (i) new equipment sales; (ii) used equipment sales; (iii) parts sales; (iv) repair and maintenance services; and (v) equipment rentals. We have operated as an equipment dealership for 37 years and have developed a branch network that includes 55 total locations in Michigan, Illinois, Indiana, Massachusetts, Maine, Connecticut, New Hampshire, Vermont, New York, Virginia, and Florida. We offer our customers a one-stop-shop for most of their equipment needs by providing sales, parts, service, and rental functions under one roof. More recently, with the acquisition of PeakLogix and subsequent acquisition of ScottTech, we have entered the warehouse design, automated equipment installation and system integration sector, which we believe has natural synergies with our Material Handling business and positions us to take advantage of the macroeconomic trend in warehousing and logistics, and e-commerce. Within our territories, we are the exclusive distributor of new equipment and replacement parts on behalf of our OEM partners. We enjoy long-standing relationships with leading Material Handling and Construction Equipment OEMs, including Hyster-Yale, Volvo, and JCB, among more than 30 others. We are consistently recognized by OEMs as a top dealership partner and have been identified as a nationally recognized Hyster-Yale dealer and multi-year recipient of the Volvo Dealer of the Year award. Business Segments We have two reportable segments: Material Handling and Construction Equipment. Our “Material Handling” segment has been previously reported as our “Industrial” segment. Our segments are determined based on management structure, which is organized based on types of products sold and customer end markets, as described in the following paragraph. The operating results for each segment are reported separately to our Chief Executive Officer (our chief operating decision maker) to make decisions regarding the allocation of resources, to assess our operating performance and to make strategic decisions. The Material Handling segment is principally engaged in operations related to the sale, service, and rental of lift trucks in Michigan, Illinois, Indiana, New York, Virginia and throughout the New England states. The Material Handling segment is made up of the legal entities Alta Industrial Equipment Michigan, LLC, Alta Industrial Equipment Company, LLC, PeakLogix, LLC and Alta Industrial Equipment New York, LLC. The Construction Equipment segment is principally engaged in operations related to the sale, service, and rental of construction equipment in Michigan, Indiana, Illinois, New York, Florida and throughout the New England States. The Construction Equipment segment is made up of the legal entities Alta Construction Equipment, LLC, Alta Construction Equipment Illinois, LLC, Alta Heavy Equipment Services, LLC, Alta Construction Equipment Florida, LLC and Alta Construction Equipment New York, LLC. As further explained below, NITCO, LLC, engages in operations related to both the Material Handling and the Construction Equipment segment within a common legal entity. Alta Equipment Group Inc., Alta Equipment Holdings, Inc. and Alta Enterprises, LLC (individually or as sometimes collectively referred to as “Corporate”) are the holding companies for the legal operating entities noted above that make up each segment. In addition to being a holding company, Alta Enterprises, LLC also holds compensation (including shared based compensation) of our directors, corporate officers and certain members of our shared-services leadership team, consulting and legal fees related to acquisitions and capital raising activities, corporate governance and compliance related matters, certain corporate development related expenses and interest expense associated with original issue discounts and deferred financing cost related to previous capital raises and the Company’s income tax provision. 30 In connection with the purchase of NITCO LLC in 2019, the Company expanded its full-service m aterial h andling and c onstruction e quipment dealer operations into New England market. Given that the sales of the business was more heavily weighted to m aterial h andling versus construction and that NITCO’s reporting systems made it difficult for the construction business to be observed separate from the m aterial h andling operation, NITCO’s total financial results were historically presented within our M aterial H andling segment. On January 1, 2021, with the migration of the NITCO business to the Company’s main ERP system, the Company is now able to report the results for the Material Handling and Construction Equipment results within their respective segments for the NITCO business unit. As such, the Company has re-casted certain prior period segment-level results for the NITCO business unit to be consistent with the current period presentation for appropriate period-over-period comparability. Acquisitions SCOTTTECH, LLC (“ScottTech”) On March 1, 2021, the Company acquired the assets of ScottTech, a Material Handling, warehouse control software, and turn-key warehouse system integration services provider, for a total purchase price of $2.4 million. The acquisition has natural synergies with the Company’s prior year acquisition of PeakLogix and further bolsters our capabilities with customers in the warehousing and logistics, distribution and e-commerce end-markets. Vantage Equipment, LLC On December 31, 2020, the Company acquired the assets of Vantage, a construction equipment dealer in Upstate New York, for a total purchase price of $24.3 million. Based on the purchase price and the amount of floorplan eligible new equipment inventory acquired in the transaction, the total enterprise value at close was $22.5 million. This acquisition further diversifies our customer base and will complement our Liftech business which serves the Upstate New York Material Handling market. Howell Tractor and Equipment, LLC On October 30, 2020, the Company acquired the assets of Howell, a construction equipment and crane dealer in the greater Chicagoland area, for cash consideration of $23.0 million. Additionally, the Company issued 507,143 shares of its common stock in connection with the purchase agreement, valued at $4.0 million, yielding a total purchase price of approximately $27.0 million. Based on the purchase price and the amount of floorplan eligible new equipment inventory acquired in the transaction, the total enterprise value at close was $23.7 million. This acquisition expands our presence in the Northern Illinois and Northwest Indiana markets adding a best-in-class product to our portfolio and additional service offerings. Martin Implement Sales, Inc. On September 1, 2020, the Company acquired the assets of Martin, a compact equipment dealer in the greater Chicagoland area, for a total purchase price of $16.1 million. Based on the purchase price and the amount of floorplan eligible new equipment inventory acquired in the transaction, the total enterprise value at close was $10.6 million. This acquisition enhances our position in the Illinois construction market, broadens our product portfolio in the compact segment of the construction equipment market and adds valuable service capabilities in the region. Hilo Equipment & Services On July 1, 2020, the Company acquired the assets of Hilo, a Material Handling equipment dealer with three branches in the New York City metro area, for a total purchase price, net of cash, of $17.2 million, which includes potential earn-out payments of $1.0 million tied to post closing performance of the Hilo business. Based on the purchase price and the amount of floorplan eligible new equipment inventory acquired in the transaction, the total enterprise value at close was $19.0 million. The acquisition aligns with our growth strategy by expanding our distribution footprint with a major OEM, giving us a strategic presence in yet another densely populated major market and strengthens our overall coverage of the Northeastern United States. PeakLogix, Inc. On June 12, 2020, the Company acquired the assets of PeakLogix, a warehouse design, automated equipment installation and systems integrator, for a total purchase price, net of cash, of $6.4 million, which 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 $3.7 million to be paid out to former owners based on meeting certain financial targets throughout the 5-year earn-out period. The acquisition represents the Company’s entrance into the automated equipment installation and system integration sector, which we believe has natural synergies with our Material Handling business and positions us to take advantage of the macroeconomic trend in warehousing and logistics, and e-commerce. Liftech Equipment Companies, Inc. On February 14, 2020, the Company acquired the assets of Liftech, a Material Handling equipment dealer in Upstate New York, for a total purchase price of $18.4 million, which was paid out of funds from closing of the reverse recapitalization. Based on the purchase price and the amount of floorplan eligible new equipment inventory acquired in the transaction, the total enterprise value at close was $15.2 million. The acquisition primarily expands our materials handling segment into the Upstate New York market, scales our relationship with a major OEM and provides an opportunity for Alta to drive market share with allied products in the region. 31 FlaglerCE Holdings, LLC On February 14, 2020, the Company acquired the assets of Flagler, a construction equipment dealer in Florida, for a total purchase price, net of cash, of $75.8 million, which was paid out of funds from the closing of the reverse recapitalization. Based on the purchase price and the amount of floorplan eligible new equipment inventory acquired in the transaction, the total enterprise value at close was $79.0 million. The acquisition expands our heavy equipment segment into the Florida construction market, scales our relationship with a major OEM and provides an opportunity for us to deploy our aftermarket strategies in a robust and growing construction market in the southeastern United States. Financial Statement Components Our revenues and related costs are primarily derived from sale or rental of equipment and related activities, and consist of: New Equipment Sales. We sell new heavy construction and Material Handling equipment and are a leading regional distributor for over 30 nationally recognized equipment manufacturers, including Hyster, Yale, Volvo, JCB, New Holland, and Kubota. Our new equipment sales operation is a primary source of new customers for the rental, parts and services business. The majority of our new equipment sales is predicated on exclusive distribution agreements we have with best-in-class OEMs. The sale of new equipment to customers, while profitable, acts as a means of generating equipment field population and activity for our higher-margin aftermarket revenue streams, specifically service and parts. We also sell tangential products related to our Material Handling equipment offerings and, with the acquisition of PeakLogix and ScottTech, we provide warehouse design, automated equipment installation, system integration and warehouse controls software. Used Equipment Sales. We sell used equipment which is typically equipment that has been taken in on trade from a customer that is purchasing new equipment, equipment coming off a third-party or financing lease arrangement, or, as is primarily the case in our Material Handling segment, equipment that has been designated for disposal and has been transferred to our used inventory from our rental fleet. Used equipment sales made in our territories, like new equipment sales, generate parts and services business for the Company, as well. Parts Sales. We sell replacement parts to customers and supply parts to our own rental fleet. Our in-house parts inventory is extensive such that we are able to provide timely service support to our customers. The majority of our parts inventory is made up of OEM replacement parts for those OEM’s with which we have exclusive dealership agreements to sell new equipment. Service Support. We provide maintenance and repair services for customer-owned equipment and we maintain our own rental fleet. In addition to repair and maintenance on an as needed or scheduled basis, we provide ongoing preventative maintenance services and warranty repairs for our customers. We have committed substantial resources to training our technical service employees and have a full-scale service infrastructure that we believe differentiates us from our competitors. Approximately half of our employees are skilled service technicians. Training, paid time off, and other non-billable costs of maintaining our expert technicians flow through this department in addition to the direct customer-billable labor. Equipment Rentals. We rent heavy construction, aerial, material handling, and compact equipment to our customers on a daily, weekly and monthly basis. Our rental fleet, which is well-maintained has an original acquisition cost (which we define as the cost originally paid to manufacturers plus any capitalized costs) of $434.1 million. The original acquisition cost of our rental fleet excludes the value of assets associated with our guaranteed purchase obligations, which are assets that are not in our day-to-day operational control. In addition to being a core business, our rental business also creates cross-selling opportunities for us in our sales and product support activities. Rental Equipment Sales. We also sell rental equipment from our rental fleet. Customers often have options to purchase equipment after or before rental agreements have matured. Rental equipment sales, like new and used equipment sales, generate customer-based equipment field population within our territories and ultimately yield high-margin parts and services revenue for us. General and Administrative Expenses. These costs are comprised of three main components: personnel costs, operational costs, and occupancy costs. Personnel costs are comprised of hourly and salaried wages for administrative employees, including incentive compensation, and employee benefits, including medical benefits. Operational costs include marketing activities, costs associated with deploying and leasing our service vehicle fleet, personal property related insurance, information technology, office and shop supplies, general corporate costs, depreciation on non-sales and rental related assets, and intangible amortization. Occupancy costs are comprised of all expenses related to office and administrative working space, including rent, utilities, property taxes, and building insurance. Other Income (Expense). This section of the financial statements is mostly comprised of interest expense and other miscellaneous items that result in income or expense. Interest expense is mostly driven by our OEM floorplan financing arrangements, a working capital line of credit, and a second lien term loan. Also included in this section of the financials are non-recurring costs, in particular expenses associated with the extinguishment of debt. 32 Results of Operations Three and six months ended June 30, 2021 compared to three and six months ended June 30, 2020 Consolidated Results Three months ended June 30, Increase (Decrease) Six months ended June 30, Increase (Decrease) 2021 2020 2021 versus 2020 2021 2020 2021 versus 2020 Revenues: New and used equipment sales $ 132.0 $ 95.1 $ 36.9 38.8 % $ 255.8 $ 177.3 $ 78.5 44.3 % Parts sales 44.1 28.1 16.0 56.9 % 85.5 56.8 28.7 50.5 % Service revenue 42.4 28.4 14.0 49.3 % 81.1 58.6 22.5 38.4 % Rental revenue 38.2 26.0 12.2 46.9 % 71.3 51.2 20.1 39.3 % Rental equipment sales 36.0 14.5 21.5 148.3 % 67.8 28.7 39.1 136.2 % Net revenue $ 292.7 $ 192.1 $ 100.6 52.4 % $ 561.5 $ 372.6 $ 188.9 50.7 % Cost of revenues: New and used equipment sales 112.5 83.5 29.0 34.7 % 219.0 155.9 63.1 40.5 % Parts sales 30.6 19.4 11.2 57.7 % 59.3 39.0 20.3 52.1 % Service revenue 16.4 11.0 5.4 49.1 % 30.9 22.4 8.5 37.9 % Rental revenue 5.2 4.5 0.7 15.6 % 10.7 9.4 1.3 13.8 % Rental depreciation 21.3 15.0 6.3 42.0 % 40.7 27.9 12.8 45.9 % Rental equipment sales 29.8 12.4 17.4 140.3 % 56.7 24.6 32.1 130.5 % Cost of revenue $ 215.8 $ 145.8 $ 70.0 48.0 % $ 417.3 $ 279.2 $ 138.1 49.5 % Gross profit $ 76.9 $ 46.3 $ 30.6 66.1 % $ 144.2 $ 93.4 $ 50.8 54.4 % General and administrative expenses 71.6 43.7 27.9 63.8 % 136.5 94.8 41.7 44.0 % Depreciation and amortization expense 2.1 1.7 0.4 23.5 % 4.1 2.7 1.4 51.9 % Total general and administrative expenses 73.7 45.4 $ 28.3 62.3 % 140.6 97.5 $ 43.1 44.2 % Income (loss) from operations $ 3.2 $ 0.9 $ 2.3 255.6 % $ 3.6 $ (4.1 ) $ 7.7 (187.8 )% Other income (expense) Interest expense, floor plan payable – new equipment (0.5 ) (0.3 ) (0.2 ) 66.7 % (1.0 ) (1.3 ) 0.3 (23.1 )% Interest expense – other (5.4 ) (5.4 ) — NA (10.6 ) (10.3 ) (0.3 ) 2.9 % Other income 0.0 0.3 (0.3 ) (100.0 )% 0.1 0.7 (0.6 ) (85.7 )% Loss on extinguishment of debt (11.9 ) — (11.9 ) NA (11.9 ) (7.6 ) (4.3 ) 56.6 % Total other income (expense) $ (17.8 ) $ (5.4 ) $ (12.4 ) 229.6 % $ (23.4 ) $ (18.5 ) $ (4.9 ) 26.5 % Loss before taxes $ (14.6 ) $ (4.5 ) (10.1 ) 224.4 % $ (19.8 ) $ (22.6 ) 2.8 (12.4 )% Income tax provision (benefit) — (0.4 ) 0.4 (100.0 )% 0.5 (1.5 ) 2.0 (133.3 )% Net loss $ (14.6 ) $ (4.1 ) (10.5 ) 256.1 % $ (20.3 ) $ (21.1 ) 0.8 (3.8 )% Preferred stock dividends (1.1 ) — (1.1 ) — (1.1 ) — (1.1 ) — Net loss available to common shareholders $ (15.7 ) $ (4.1 ) $ (11.6 ) 282.9 % $ (21.4 ) $ (21.1 ) $ (0.3 ) 1.4 % 33 Percent of Revenue Percent of Revenue Consolidated Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Revenues: New and used equipment sales 45.1 % 49.5 % 45.6 % 47.6 % Parts sales 15.1 % 14.6 % 15.2 % 15.2 % Service revenue 14.5 % 14.8 % 14.4 % 15.7 % Rental revenue 13.1 % 13.5 % 12.7 % 13.7 % Rental equipment sales 12.3 % 7.5 % 12.1 % 7.7 % Net revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenues: New and used equipment sales 38.4 % 43.5 % 39.0 % 41.8 % Parts sales 10.5 % 10.1 % 10.6 % 10.5 % Service revenue 5.6 % 5.7 % 5.5 % 6.0 % Rental revenue 1.8 % 2.3 % 1.9 % 2.5 % Rental depreciation 7.3 % 7.8 % 7.2 % 7.5 % Rental equipment sales 10.2 % 6.5 % 10.1 % 6.6 % Cost of revenue 73.7 % 75.9 % 74.3 % 74.9 % Gross profit 26.3 % 24.1 % 25.7 % 25.1 % Revenues: Consolidated revenues increased by $100.6 million, or 52.4%, to $292.7 million for the three months ended June 30, 2021 as compared to the same period last year. The primary drivers of this period over period increase were the favorable full period impact from the acquisitions completed in 2020, coupled with the impact COVID-19 had on the 2020 comparative period. If excluding the effects of acquisition by observing the consolidated results on an organic basis, thereby including only the results of the entities that appear fully in both periods, new and used equipment sales increased 6.7% over the same period last year as market demand for equipment increased and despite supply chain issues with obtaining new equipment. Organic parts and service revenues increased by 30.5% and 31.1%, respectively, over the same period last year, as the impact of COVID-19 had an acute reduction on the aftermarket revenue streams in 2020. Similarly, rental revenue exhibited growth on an organic basis of 30.9% period over period as physical utilization trends improve and rental rates have increased. Lastly, and in following with the pattern from the first quarter of 2021, rental equipment sales increased organically by 93.5% as we continue to actively manage our fleet mix, and our rent-to-sell model enables us to meet customer demand for lightly used equipment while lead times for new equipment are extended amid the global supply chain issues of many manufacturers. Importantly, despite macro-level supply chain issues, our robust parts inventory and ongoing parts availability from key OEMs has allowed us to continue to service customers and maintain profitability in our high margin product support departments. Consolidated revenues increased by $188.9 million, or 50.7%, to $561.5 million for the six months ended June 30, 2021 as compared to the same period last year. The primary drivers of this period over period increase were the favorable full period impact from the acquisitions completed in 2020, as well as when factoring the negative impact the COVID-19 pandemic had on our 2020 comparative period. Three months ended June 30, Six months ended June 30, 2021 2020 Change 2021 2020 Change Consolidated GP% GP% GP% GP% GP% GP% New and used equipment sales 14.8 % 12.2 % 2.6 % 14.4 % 12.1 % 2.3 % Parts sales 30.6 % 31.0 % (0.3 )% 30.6 % 31.3 % (0.7 )% Service revenue 61.3 % 61.3 % 0.1 % 61.9 % 61.8 % 0.1 % Rental revenue 30.6 % 25.0 % 5.6 % 27.9 % 27.1 % 0.8 % Rental equipment sales 17.2 % 14.5 % 2.7 % 16.4 % 14.3 % 2.1 % Consolidated gross profit 26.3 % 24.1 % 2.2 % 25.7 % 25.1 % 0.6 % 34 Gross profit (GP): The consolidated gross profit for the three months ended June 30, 2021 was 26.3%, a 2.2% increase from the 24.1% for the same period in 2020, which represents an increase of 1.3% in comparison to the first quarter of 2021. New and used equipment sales, as well as rental equipment sales, margins improved slightly in the second quarter compared to the same time last year as retail pricing levels improved, especially for used equipment. We realized an increase in rental revenue gross margin in the second quarter of 2021, largely as a result improved physical utilization of the rental fleet. Additionally, parts sales gross margins decreased as a whole, in part due to the relative segment sales mix while service gross margins improved modestly. The consolidated gross profit for the six months ended June 30, 2021 was 25.7%, a 0.6% increase from the 25.1% for the same period in 2020. General and Administrative expenses: Consolidated general and administrative (G&A) expenses increased by $28.3 million to $73.7 million for the three months ended June 30, 2021 compared to the same period last year. This increase was mainly driven by the full period impact from our 2020 acquisitions as well as an increase in certain corporate-level administrative and compensation-related expenses, many of which are incremental expenses associated with our status as a public company. Further, many temporary cost-saving measures were enacted in the three months ended June 30, 2020, including but not limited to a reduction in executive-level compensation, employee furloughs, travel and entertainment restrictions, discretionary spending freezes, and a suspension of matching contributions into the 401(k), which assisted in defraying the reductions in revenue amid the beginning of the COVID-19 pandemic, while such measures were not in place in the three months ended June 30, 2021. Consolidated general and administrative (G&A) expenses increased by $43.1 million to $140.6 million for the six months ended June 30, 2021 compared to the same period last year. Other Income (expense): Consolidated other expense for the three months ended June 30, 2021 was $(17.8) million compared to $(5.4) million for the same period in 2020. This change was mainly driven by the $11.9 million loss on debt extinguishment that occurred within the current quarter. Consolidated other expense for the six months ended June 30, 2021 increased by $4.9 million compared to the same period last year. The year over year change was primarily attributable to the $11.9 million loss on debt extinguishment. Provision for income taxes: Income tax provision for the six months ended June 30, 2021 was $0.5 million compared to the income tax benefit of $1.5 for the six months ended June 30, 2020. This change is due to establishing valuation allowance within the period against the deferred tax assets associated with losses for which we may not realize a related tax benefit in 2021. Preferred Stock Dividend: Preferred stock dividends were $1.1 million for the three months ended June 30, 2021. This relates to the Company’s first dividend payout on its Series A Preferred Stock that it issued on December 22, 2020. The dividend payment paid on April 30, 2021, covered the period from and including December 22, 2020 through, but not including April 30, 2021. 35 Material Handling Results: Three months ended June 30, Increase (Decrease) Six months ended June 30, Increase (Decrease) 2021 2020 2021 versus 2020 2021 2020 2021 versus 2020 Revenues: New and used equipment sales $ 60.1 $ 44.7 $ 15.4 34.5 % $ 117.5 $ 84.4 $ 33.1 39.2 % Parts sales 15.7 10.7 5.0 46.7 % 30.9 $ 24.8 6.1 24.6 % Service revenue 24.1 16.7 7.4 44.3 % 46.7 $ 36.4 10.3 28.3 % Rental revenue 11.4 9.6 1.8 18.8 % 22.5 $ 20.2 2.3 11.4 % Rental equipment sales 0.3 1.1 (0.8 ) (72.7 )% 0.8 $ 4.6 (3.8 ) (82.6 )% Net revenue $ 111.6 $ 82.8 $ 28.8 34.8 % $ 218.4 $ 170.4 $ 48.0 28.2 % Cost of revenues: New and used equipment sales 48.0 38.7 9.3 24.0 % 95.0 72.8 22.2 30.5 % Parts sales 10.1 7.0 3.1 44.3 % 20.0 15.8 4.2 26.6 % Service revenue 9.0 5.9 3.1 52.5 % 17.1 13.1 4.0 30.5 % Rental revenue 1.5 1.7 (0.2 ) (11.8 )% 3.2 3.6 (0.4 ) (11.1 )% Rental depreciation 3.4 4.0 (0.6 ) (15.0 )% 7.0 7.9 (0.9 ) (11.4 )% Rental equipment sales 0.2 0.6 (0.4 ) (66.7 )% 0.6 3.6 (3.0 ) (83.3 )% Cost of revenue $ 72.2 $ 57.9 $ 14.3 24.7 % $ 142.9 $ 116.8 $ 26.1 22.3 % Gross profit $ 39.4 $ 24.9 $ 14.5 58.2 % $ 75.5 $ 53.6 $ 21.9 40.9 % General and administrative expenses 35.2 20.8 14.4 69.2 % 67.6 46.2 21.4 46.3 % Depreciation and amortization expense 1.0 0.8 0.2 25.0 % 2.0 1.5 0.5 33.3 % Total general and administrative expenses $ 36.2 $ 21.6 $ 14.6 67.6 % $ 69.6 $ 47.7 $ 21.9 45.9 % Income from operations $ 3.2 $ 3.3 $ (0.1 ) (3.0 )% $ 5.9 $ 5.9 $ 0.0 0.0 % Other income (expense) Interest expense, floor plan payable – new equipment (0.1 ) (0.2 ) 0.1 (50.0 )% (0.3 ) (0.5 ) 0.2 (40.0 )% Interest expense – other (1.8 ) (1.1 ) (0.7 ) 63.6 % (3.8 ) (2.2 ) (1.6 ) 72.7 % Other income 0.7 0.3 0.4 133.3 % 1.5 0.4 1.1 275.0 % Total other income (expense) $ (1.2 ) $ (1.0 ) $ (0.2 ) 20.0 % $ (2.6 ) $ (2.3 ) $ (0.3 ) 13.0 % Net income $ 2.0 $ 2.3 $ (0.3 ) (13.0 )% $ 3.3 $ 3.6 $ (0.3 ) (8.3 )% 36 Percent of Revenue Percent of Revenue Material Handling Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Revenues: New and used equipment sales 53.9 % 54.0 % 53.8 % 49.5 % Parts sales 14.1 % 12.9 % 14.1 % 14.6 % Service revenue 21.6 % 20.2 % 21.4 % 21.4 % Rental revenue 10.2 % 11.6 % 10.3 % 11.9 % Rental equipment sales 0.3 % 1.3 % 0.4 % 2.7 % Net revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenues: New and used equipment sales 43.0 % 46.7 % 43.5 % 42.7 % Parts sales 9.1 % 8.5 % 9.2 % 9.3 % Service revenue 8.1 % 7.1 % 7.8 % 7.7 % Rental revenue 1.3 % 2.1 % 1.5 % 2.1 % Rental depreciation 3.0 % 4.8 % 3.2 % 4.6 % Rental equipment sales 0.2 % 0.7 % 0.3 % 2.1 % Cost of revenue 64.7 % 69.9 % 65.4 % 68.5 % Gross profit 35.3 % 30.1 % 34.6 % 31.5 % Revenues: Material Handling segment revenues increased by 34.8% to $111.6 million for the three months ended June 30, 2021 as compared to the same period last year. Overall, revenue streams were up as a result of the PeakLogix and Hilo acquisitions that closed in June 2020 and July 2020, respectively, as well as a recovery from the COVID-19 impact that greatly influenced Material Handling revenues in the second quarter of 2020. While continuing to improve, the Material Handling segment has been slower to recover from the impact of the COVID-19 pandemic versus the Construction segment, and global supply chain issues with OEM suppliers have tempered the first half results of 2021. On an organic basis, and due to supply chain delays, new and used equipment sales decreased 5.2%, however, importantly, aftermarket parts and service revenues increased 31.5% when comparing to the same period last year. Rental revenue increased 7.6% on an organic basis from the same period last year. Material Handling segment revenues increased by 28.2% to $218.4 million for the six months ended June 30, 2021 as compared to the same period last year, again attributable to the influence of acquisitions made in 2020 and a recovery from the influence of COVID-19 on 2020 results. Gross profit (GP): Three months ended June 30, Six months ended June 30, 2021 2020 Change 2021 2020 Change GP% GP% GP% GP% GP% GP% New and used equipment sales 20.1 % 13.4 % 6.7 % 19.1 % 13.7 % 5.4 % Parts sales 35.7 % 34.6 % 1.1 % 35.3 % 36.3 % (1.0 )% Service revenue 62.7 % 64.7 % (2.0 )% 63.4 % 64.0 % (0.6 )% Rental revenue 57.0 % 40.6 % 16.4 % 54.7 % 43.1 % 11.6 % Rental equipment sales 33.3 % 45.5 % (12.1 )% 25.0 % 21.7 % 3.3 % Segment gross profit 35.3 % 30.1 % 5.2 % 34.6 % 31.5 % 3.1 % 37 Material Handling gross profit for the three months ended June 30, 2021 increased 5.2% to 35.3% compared to the same period in 2020. We realized improved new and used equipment gross margin in the second quarter of 2021 when compared to the same period in 2020 as retail pricing for equipment has strengthened amid increased demand for equipment and a dearth of new supply. Increased equipment margins for the three months ended June 30, 2021 are also attributable to Peaklogix and ScottTech’s influence, as their design and build projects realize higher margins than lift truck sales. We also realized an increase in rental revenue gross margin in the second quarter of 2021 as cost of revenues decreased, mainly due to our updated depreciation method as described in our Note 2 to the Consolidated Financial Statements. Service revenue gross profit margins decreased by 2.0% while the parts sales gross profit margins increased by 1.1% in the second quarter of 2021 compared to the same period in 2020. Service margin declines can be attributed to the cost-saving measures taken in the second quarter of 2020, which caused margin increase in that time frame, as technicians remaining on staff were able to be utilized efficiently at customers that were able to remain open, many of which were deemed essential businesses, through the shutdowns experienced during the initial stages of the COVID-19 pandemic. Material Handling gross profit margins for the six months ended June 30, 2021 increased 3.1% to 34.6% compared to the same period in 2020 for the aforementioned reasons. General and administrative expenses: Material Handling general and administrative (G&A) expenses increased by $14.6 million to $36.2 million for the three months ended June 30, 2021 as compared to the same period last year. This change was mainly driven by the higher employee related and general expenses attributable to the Material Handling segment acquisitions of PeakLogix and Hilo. Additionally, many cost-saving measures were enacted in the three months ended June 30, 2020 which assisted in defraying the reductions in revenue amid the most acutely impacted periods of the COVID-19 pandemic, these measures were no longer in place during the three months ended June 30, 2021. Material Handling general and administrative (G&A) expenses increased by 45.9% to $69.6 million for the six months ended June 30, 2021, as compared to the same period last year for the same reasons as discussed above. Other Income (expense): Material Handling other expense increased by $0.2 to ($1.2) million for the three months ended June 30, 2021, as compared to the same period last year. The majority of the quarter-over-quarter increase was the result of the addition of debt related to the PeakLogix and Hilo acquisitions, as their assets were financed via our line of credit and floorplan financing facilities. Material Handling other expense increased by $0.3 million to ($2.6) million for the six months ended June 30, 2021, as compared to the same period last year. 38 Construction Equipment Results Three months ended June 30, Increase (Decrease) Six months ended June 30, Increase (Decrease) 2021 2020 2021 versus 2020 2021 2020 2021 versus 2020 Revenues: New and used equipment sales $ 71.9 $ 50.4 $ 21.5 42.7 % $ 138.3 $ 92.9 $ 45.4 48.9 % Parts sales 28.4 17.4 11.0 63.2 % 54.6 32.0 22.6 70.6 % Service revenue 18.3 11.7 6.6 56.4 % 34.4 22.2 12.2 55.0 % Rental revenue 26.8 16.4 10.4 63.4 % 48.8 31.0 17.8 57.4 % Rental equipment sales 35.7 13.4 22.3 166.4 % 67.0 24.1 42.9 178.0 % Net revenue $ 181.1 $ 109.3 $ 71.8 65.7 % $ 343.1 $ 202.2 $ 140.9 69.7 % Cost of revenues: New and used equipment sales 64.5 44.7 19.8 44.3 % 124.0 83.1 40.9 49.2 % Parts sales 20.5 12.5 8.0 64.0 % 39.3 23.2 16.1 69.4 % Service revenue 7.4 5.1 2.3 45.1 % 13.8 9.3 4.5 48.4 % Rental revenue 3.7 2.8 0.9 32.1 % 7.5 5.8 1.7 29.3 % Rental depreciation 17.9 11.0 6.9 62.7 % 33.7 20.0 13.7 68.5 % Rental equipment sales 29.6 11.8 17.8 150.8 % 56.1 21.0 35.1 167.1 % Cost of revenue $ 143.6 $ 87.9 $ 55.7 63.4 % $ 274.4 $ 162.4 $ 112.0 69.0 % Gross profit $ 37.5 $ 21.4 $ 16.1 75.2 % $ 68.7 $ 39.8 $ 28.9 72.6 % General and administrative expenses 33.8 20.3 13.5 66.5 % 63.5 38.3 25.2 65.8 % Depreciation and amortization expense 1.1 0.9 0.2 22.2 % 2.1 1.2 0.9 75.0 % Total general and administrative expenses $ 34.9 $ 21.2 $ 13.7 64.6 % $ 65.6 $ 39.5 $ 26.1 66.1 % Income from operations $ 2.6 $ 0.2 $ 2.4 1200.0 % $ 3.1 $ 0.3 $ 2.8 933.3 % Other income (expense) Interest expense, floor plan payable – new equipment (0.4 ) (0.1 ) (0.3 ) 300.0 % (0.7 ) (0.6 ) (0.1 ) 16.7 % Interest expense – other (3.2 ) (2.7 ) (0.5 ) 18.5 % (6.0 ) (4.7 ) (1.3 ) 27.7 % Other (expense) income (0.7 ) 0.1 (0.8 ) (800.0 )% (1.4 ) 0.3 (1.7 ) (566.7 )% Total other income (expense) $ (4.3 ) $ (2.7 ) $ (1.6 ) 59.3 % $ (8.1 ) $ (5.0 ) $ (3.1 ) 62.0 % Net loss $ (1.7 ) $ (2.5 ) $ 0.8 (32.0 )% $ (5.0 ) $ (4.7 ) $ (0.3 ) 6.4 % 39 Percent of Revenue Percent of Revenue Construction Equipment Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Revenues: New and used equipment sales 39.7 % 46.1 % 40.3 % 45.9 % Parts sales 15.7 % 15.9 % 15.9 % 15.8 % Service revenue 10.1 % 10.7 % 10.0 % 11.0 % Rental revenue 14.8 % 15.0 % 14.2 % 15.3 % Rental equipment sales 19.7 % 12.3 % 19.5 % 11.9 % Net revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenues: New and used equipment sales 35.6 % 40.9 % 36.1 % 41.1 % Parts sales 11.3 % 11.4 % 11.5 % 11.5 % Service revenue 4.1 % 4.7 % 4.0 % 4.6 % Rental revenue 2.0 % 2.6 % 2.2 % 2.9 % Rental depreciation and amortization 10.0 % 10.1 % 9.8 % 9.9 % Rental equipment sales 16.3 % 10.8 % 16.4 % 10.4 % Cost of revenue 79.3 % 80.4 % 80.0 % 80.3 % Gross profit 20.7 % 19.6 % 20.0 % 19.7 % Revenues: Construction Equipment segment revenues increased by 65.7% to $181.1 million for the three months ended June 30, 2021 as compared to the same period last year. This increase was mainly attributable to the full period results from the Martin, Howell and Vantage acquisitions that occurred throughout the second half of 2020. The Construction Equipment segment, which was less operationally impacted by COVID-19 versus our Material Handling segment, has also been quicker to recover from the impact of the COVID-19 pandemic than our Material Handling segment. On an organic basis, new and used equipment sales increased 18.2%, and parts and service revenues are up 29.9% when comparing to the same period last year, as we have realized increased technician headcount on an organic basis. Rental revenue has increased on an organic basis of 48.1%, and rental equipment sales increased 107.5% from the same time a year ago on an organic basis. Our rental department experienced an increase in both utilization and rate improvement, along with an increase in the demand for customers seeking the purchase of lightly used equipment amid OEM production shortages for new equipment. Sustaining our rental fleet size throughout the COVID-19 pandemic has proven beneficial to begin 2021 as we are well-positioned to secure rental and sales opportunities in a strong pricing environment. Construction Equipment segment revenues increased by 69.7% to $343.1 million for the six months ended June 30, 2021 as compared to the same period last year. Gross profit (GP): Three months ended June 30, Six months ended June 30, 2021 2020 Change 2021 2020 Change GP% GP% GP% GP% GP% GP% New and used equipment sales 10.3 % 11.3 % (1.0 )% 10.3 % 10.5 % (0.2 )% Parts sales 27.8 % 28.2 % (0.3 )% 28.0 % 27.5 % 0.5 % Service revenue 59.6 % 56.4 % 3.2 % 59.9 % 58.1 % 1.8 % Rental revenue 19.4 % 15.9 % 3.5 % 15.6 % 16.8 % (1.2 )% Rental equipment sales 17.1 % 11.9 % 5.1 % 16.3 % 12.9 % 3.4 % Segment gross profit 20.7 % 19.6 % 1.1 % 20.0 % 19.7 % 0.3 % 40 Construction Equipment gross profit increased by 1.1% to 20.7% in the three months ended June 30, 2021, from 19.6% compared to the same period in 2020. New and used equipment sales margins as well as parts margins held flat compared to the same period in 2020. Service revenue margins were up 3.2% in the second quarter of 2021 compared to the same period in 2020, and in line with expectations. Rental revenue gross margins improved amid strengthening physical utilization and a positive rate environment. Additionally, rental equipment sales gross margin improved by 3.1% as favorable pricing conditions exist in the market for lightly used equipment. Construction Equipment gross profit increased by 0.3% to 20% in the six months ended June 30, 2021, from 19.7% compared to the same period in 2020. General and Administrative expenses: Construction Equipment general and administrative (G&A) expenses increased by $13.7 million to $34.9 million for the three months ended June 30, 2021, as compared to the same period in 2020. The quarter over quarter increase was mainly attributable to the full period G&A impact as a result of the construction segment acquisitions of Martin, Howell and Vantage throughout the second half of 2020. Construction Equipment general and administrative (G&A) expenses increased by $26.1 million to $65.6 million for the six months ended June 30, 2021, as compared to the same period in 2020 for the same reasons as discussed above. Other Income (expense): Construction Equipment other expense increased by $1.6 million to ($4.3) million for the three months ended June 30, 2021, as compared to the same period in 2020. The quarter over quarter increase was mainly due to the interest expense respective to the 2020 acquisitions, as assets were financed through our line of credit and floorplan financing facilities. Construction Equipment other expense increased to ($8.1) million for the six months ended June 30, 2021, as compared to ($5.0) the same period in 2020. Liquidity and Capital Resources Six months ended June 30, 2021 compared with six months ended June 30, 2020 Cash Flows Cash Flow from Operating Activities . Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. For the six months ended June 30, 2021, operating activities resulted in net cash provided by operations of $8.6 million. Our reported net loss of $20.3 million, when adjusted for non-cash income and expense items, such as depreciation and amortization, debt extinguishment, changes in deferred taxes and the share-based payments, provided net cash inflows of $30.6 million. Changes in working capital included $87.4 million of net new inventory purchased which was offset by transfers of $88.1 million to used and rental fleet, a $18.6 million increase in accounts receivable and $9.3 million unfavorable change in prepaid expenses and other assets and leases and other liabilities. Cash flows from operating activities were favorably impacted by $67.8 million due to proceeds from the sale of rental equipment, a $19.5 million increase in accounts payable, accrued expenses, customer deposits, and other liabilities and a $6.0 million in net proceeds from manufacturer floor plans. For the six months ended June 30, 2020, operating activities resulted in net cash used in operations of $54.1 million. Our reported net loss of $21.1 million, when adjusted for non-cash income and expense items, such as depreciation and amortization, former debt extinguishment, and the share-based payments, provided net cash inflows of $6.9 million. Changes in working capital included a $80.5 million increase in inventories, $15.3 million in net payments on manufacturer floor plans, and a $1.2 million cash outflow in prepaid expense and other assets. Cash flows from operating activities were positively impacted by a $28.7 million increase in proceeds from the sale of rental equipment, a $3.2 million favorable change in accounts receivable, and a $4.1 million cash inflows from accounts payable, accrued expenses, customer deposits, and other liabilities. Cash Flow from Investing Activities . For the six months ended June 30, 2021, our cash used in investing activities was $27.6 million. This was mainly due to $25.0 million purchases of rental equipment and non-rental property and equipment offset by proceeds from the sale of assets and $2.6 million use of cash for the recent ScottTech acquisition and Howell working capital adjustment. For the six months ended June 30, 2020, our cash used in investing activities was $123.4 million. This was mainly due to $98.0 million use of cash as a result of the Flagler, Liftech and PeakLogix acquisitions and $25.5 million for purchases of rental equipment and non-rental property and equipment. Cash Flow from Financing Activities. For the six months ended June 30, 2021, cash provided by financing activities was $19.6 million. The favorable impact was mainly due to $310.2 million net proceeds from the Notes issuance. This was partially offset by $153.1 million payments related to the extinguishment of term loan, $126.2 million of net payments under our lines of credits, net payments of $5.4 million related to the floor plans with an unaffiliated source (i.e. a non-vendor), $2.2 million payments on long term debt and capital lease obligations, $2.1 million payments related to preferred dividend and promissory notes, and $1.6 million of payments related to debt issuance costs. 41 For the six months ended June 30, 2020, cash provided by financing activities was $183.9 million. The favorable impact was mainly due to $175.7 million proceeds from the completion of the reverse recapitalization. Net proceeds under long-term debt and lines of credit were $149.4 and $117.8 million, respectively. Additionally, proceeds from disgorgement of short swing profits was $1.6 million. This was partially offset by payments related to the extinguishment of former debt, a line of credit and redemption of former shareholders’ notes payable all of which totaled $221.6 million, an extinguishment of a warrant liability of $29.6 million, expenditures of debt issuance costs of $2.7 million, repurchases of common stock of $2.9 million and a $ 3.1 million payment on long term debt and capital lease obligations. Additionally, $0.7 million net payments on the floor plans with an unaffiliated source (i.e. a non-vendor) were also made . Sources of Liquidity The Company reported $1.8 million in cash for the six months ended June 30, 2021. On April 1, 2021, the Company completed a private offering of $315 million of its 5.625% Senior Secured Second Lien Notes due 2026 (the “Notes”). The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended, pursuant to a purchase agreement among the Company, the guarantors party thereto and J.P. Morgan Securities LLC, as representative of the initial purchasers. The Notes are guaranteed by the guarantors on a second lien, senior secured basis. The Notes were issued pursuant to an indenture dated April 1, 2021 among the Company, the guarantors and Wilmington Trust, National Association, as trustee and as collateral agent. The Notes mature on April 15, 2026. Interest on the Notes is payable in cash on April 15 and October 15 of each year, beginning on October 15, 2021. Effective April 1, 2021, the Company amended and restated its credit facility with its first lien lender by entering into the Sixth Amended and Restated ABL First Lien Credit Agreement (“Amended and Restated Credit Agreement” and the facility thereunder, the “ABL Facility”) by and among Alta Equipment Group Inc. and the other credit parties named therein, the lenders named therein, JP Morgan Chase Bank, N.A., as Administrative Agent, and the syndication agents and documentation agent named therein. Subject to the borrowing base limitation in the Amended and Restated Credit Agreement, the ABL Facility provides borrowings of up to $350 million and matures on the earlier of April 1, 2026 or December 1, 2025 if any of the Notes remain outstanding as of December 1, 2025. In connection with the offering of the Notes and the Amended and Restated Credit Agreement, the Company amended and restated its floor plan facility with its first lien lender by entering into the Sixth Amended and Restated Floor Plan First Lien Credit Agreement (“Floor Plan Credit Agreement”) by and among Alta Equipment Group Inc. and the other credit parties named therein, the lender JP Morgan Chase Bank, N.A., as Administrative Agent. The Floor Plan Credit Agreement is an asset-based revolving loan facility related to the floor plan equipment that provides for borrowings of up to the lesser of $40 million or the borrowing base. The Floor Plan Facility has an expiration date of the earlier of (a) April 1, 2026, or (b) December 1, 2025 if the Notes remain outstanding on December 1, 2025. Line of Credit and First Lien Floor Plan Facility The Company has a revolving line of credit with its first lien holder with advances on the line being supported by eligible accounts receivable, parts, and otherwise unencumbered new and used equipment inventory and rental equipment. The revolving line of credit has a maximum borrowing capacity of $350 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 June 30, 2021, the Company had an outstanding revolving line of credit balance of $33.8 million, excluding unamortized debt issuance costs. The Company has a First Lien Floor Plan Facility with its first lien lender to primarily finance new inventory. This First Lien Floor Plan Facility has a maximum borrowing capacity of $40 million. The interest cost for the First Lien Floor Plan Facility is LIBOR plus an applicable margin. The First Lien Floor Plan Facility is collateralized by substantially all assets of the Company. As of June 30, 2021, the Company had an outstanding balance on their First Lien Floor Plan Facility of $30 million, excluding unamortized debt issuance costs. Original Equipment Manufacturer (“OEM”) Captive Lenders and Suppliers’ Floor Plans OEM captive lender and suppliers’ floor plans payable are financing arrangements for new and used inventory and rental equipment. We have such arrangements with several OEM captive lenders and suppliers each with borrowing capacities ranging from $2.0 million to $102.0 million. Certain floor plans provide for a five to twelve-month interest only or deferred payment period. In addition, these floor plan agreements provide for interest or principal free terms at the supplier’s discretion. The Company routinely sells equipment that is financed under OEM captive lender floor plans prior to the original maturity date of the financing agreement. The related OEM captive lender floor plans payable is then due and payable at the time the equipment being financed is sold. Maximum borrowings under the floor plans and the revolving line of credit are limited to $600 million. The total amount outstanding as of June 30, 2021 and December 31, 2020 was $191.5 million and $316.6 million, exclusive of debt issuance and deferred financings costs of $2.7 million and $1.5 million, respectively. Senior Secured Second Lien Notes As of June 30, 2021, outstanding borrowings under the Senior Secured Second Lien Notes were $315.0 million, which included $5.7 million deferred financing costs and original issue discounts. As of June 30, 2021, the effective interest rate was 5.625%. 42 Cash Requirements Related to Operations Our principal sources of liquidity have been from cash provided by our service-related operations and the sales of new, used and rental fleet equipment along with rentals of such equipment, proceeds from the issuance of debt, and borrowings available under our lines of credit and floor plans. Our principal uses of cash have been to fund operating activities and working capital (including new and used equipment inventories), purchases of rental fleet equipment and property and equipment, fund payments due under lines of credit and flooring plans payable, fund acquisitions, and meet debt service requirements. In the future, we may pursue additional strategic acquisitions and seek to open new start-up locations. We anticipate that the uses described above encompass the principal demands on our cash and availability under our lines of credit in the future. The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. Our gross rental fleet capital expenditures for the period ended June 30, 2021 was approximately $110.9 million, including $88.1 million of transfers from new and used inventory to rental fleet. This gross rental fleet capital expenditure was offset by sales proceeds of rental equipment of approximately $67.8 million for the period ended June 30, 2021 as our business model is to sell lightly used inventory to customers from our rental fleet so as to increase field population in our geographies. In response to changing economic conditions, we have the flexibility to modify our capital expenditures, especially as it relates to rental fleet. To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness, will depend upon our future operating performance and the availability of borrowings under the lines of credit and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash, and available borrowings under the lines of credit will be adequate to meet our future liquidity needs for the foreseeable future. As of June 30, 2021, we had $367.4 million of available borrowings under the revolving line of credit and floor plans. We cannot provide absolute assurance that our future cash flow from operating activities will be sufficient to meet our long-term obligations and commitments. If we are unable to generate sufficient cash flow from operating activities in the future to service our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or operations, or seeking to raise additional debt or equity capital. Given current economic and market conditions, including the volatility in the global capital markets, we cannot assure investors that any of these actions could be affected on a timely basis or on satisfactory terms or at all, or that these actions would enable us to continue to satisfy our capital requirements. In addition, our existing debt agreements, as well as any future debt agreements, contain or may contain restrictive covenants, which may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt. The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the Company. As of June 30, 2021, there was $1.4 million in outstanding letters of credits issued in the normal course of business. The Company was also party to certain contracts in which it guarantees the performance of lease agreements between various third-party leasing companies. 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 lease obligation as specified in the contract. The estimated exposure related to these guarantees was $1.3 million and $2.4 million at June 30, 2021 and December 31, 2020, 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 June 30, 2021 and December 31, 2020, respectively. Critical accounting policies In the preparation of consolidated financial statements prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. Our management, on an ongoing basis, reviews these estimates and assumptions. While we believe the estimates and judgments we use in preparing our consolidated financial statements are appropriate, they are subject to future events and uncertainties regarding their outcome and, therefore, actual results may materially differ from these estimates. The Company updated the depreciable useful lives of certain of its rental equipment product categories based on our year-end analysis of fair value relative to book value, prior-year utilization trends and a review of market participants approach to depreciation for similar products. Per our accounting policy the updates to depreciable useful lives will be adjusted on prospective basis. Specifically, the notable changes for 2021 will be extending the depreciable life on lift trucks in our Material Handling segment to 84 months, extending the depreciable life on certain aerial and crane related assets in our construction segment to 120 months and applying straight-line depreciation to underutilized construction equipment assets that are being depreciated on a unit-of-activity basis to the extent the assets meet certain underutilized thresholds. Refer to Part I, Item 1, Note 2 of the Notes to our Consolidated Financial Statements for disclosures regarding the use of estimates and assumptions. See Note 2 to the audited consolidated financial statements contained in the Company’s 2020 Annual Report on Form 10-K for a summary of our significant accounting policies. 43 Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a “smaller reporting company” as defined by Rule 10(f)(1) of Regulation S-K, the Company is not required to provide this information.