What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-12 · 145 added, 128 removed, 369 unchanged (43% of the section changed)

8 unchanged sentences

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.

2 unchanged sentences

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;

While our operations in the third quarter of 2021, in general, performed 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 the COVID-19 pandemic.

We believe that the acquisitions and investments made in the calendar year 2020 and through the first three quarters 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.

25 unchanged sentences

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;

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, inflationary pressures resulting from supply chain disruptions or a tightening labor market, 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;

11 unchanged sentences

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.

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 two quarters 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.

7 unchanged sentences

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 have operated as an equipment dealership for 37 years and have developed a branch network that includes over 55 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.

10 unchanged sentences

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 Material Handling segment is made up of the legal entities Alta Industrial Equipment Michigan, LLC, Alta Industrial Equipment Company, LLC, Alta Material Handling Upstate New York, 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.

6 unchanged sentences

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.

Baron Industries

On September 1, 2021, the Company acquired Baron Industries (“Baron”), a privately held dock & door company, for a total purchase price of $1.3 million.

Baron specializes in commercial overhead loading dock doors and equipment, hydraulic lifts, and vertical reciprocating conveyors.

The acquisition is another step in the Company’s strategy to build out a full-service warehousing and logistics offering within the material handling segment.

SCOTTTECH, LLC (“ScottTech”)

4 unchanged sentences

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 $22.6 million.

This acquisition further diversifies our customer base and will complement our Liftech business which serves the Upstate New York Material Handling market.

The acquisition expands our construction equipment segment into the Upstate New York market, scales our relationship with a major OEM and diversifies the Company’s end markets.

Howell Tractor and Equipment, LLC

8 unchanged sentences

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.

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, and potential additional 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.

10 unchanged sentences

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.

The acquisition expands our heavy equipment business 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

1 unchanged sentence

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.

34 unchanged sentences

Results of Operations

Three and six months ended June 30, 2021 compared to three and six months ended June 30, 2020

Three and nine months ended September 30, 2021 compared to three and nine months ended September 30, 2020

Consolidated Results

Three Months Ended

September 30,

Increase (Decrease)

Six months ended

Nine Months Ended

September 30,

Increase (Decrease)

16 unchanged sentences

Income (loss) from operations

Other income (expense)

Other (expense) income

Interest expense, floor plan payable – new equipment

1 unchanged sentence

Loss on extinguishment of debt

Total other income (expense)

Loss before taxes

Total other (expense) income

Income (loss) before taxes

Income tax provision (benefit)

Net Income (loss)

Preferred stock dividends

Net loss available to common shareholders

Net (loss) income available to common shareholders

Percent of Revenue

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

New and used equipment sales

9 unchanged sentences

Cost of revenue

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.

Consolidated revenues increased by $74.4 million, or 33.7%, to $295.0 million for the three months ended September 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, the favorable business climate existing in the quarter, and the relative 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 27.8% over the same period last year as market demand for equipment remains high, but lead time delays within the supply chain have limited our ability for even greater new equipment throughput, resulting in a large sales order backlog.

Organic parts and service revenues increased by 8.7% and 9.2%, 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.

Similarly, rental revenue exhibited growth on an organic basis of 15.1% period over period as physical utilization trends improve and rental rates have increased amidst industry-wide delays in new equipment deliveries.

Lastly, and in following with the pattern from the first and second quarter of 2021, rental equipment sales increased organically by 32.0% 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,

Consolidated revenues increased by $263.3 million, or 44.4% to $856.5 million for the nine months ended September 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, the favorable business climate existing throughout much of 2021 and our ability to grow organically, and the relative influence the COVID-19 pandemic had on our 2020 comparative period.

Three Months Ended September 30,

Nine Months Ended September 30,

New and used equipment sales

4 unchanged sentences

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.

The consolidated gross profit for the three months ended September 30, 2021 was 27.5%, a 1.8% increase from the 25.7% for the same period in 2020, which represents an increase of 1.2% in comparison to the second quarter of 2021.

New and used equipment sales, as well as rental equipment sales, margins improved slightly in the third quarter compared to the same time last year as retail pricing levels improved and our Material Handling segment’s design and build business, which realizes higher gross margins than traditional lift truck sales, was a larger portion of equipment sales for the quarter versus the same period last year.

We realized an increase in rental revenue gross margin in the third quarter of 2021, largely as a result improved physical utilization of the rental fleet and our updated depreciation method as described in our Note 2 to the Consolidated Financial Statements.

Additionally, parts sales gross margins improved modestly while service gross margins reduced, in part due to a year-over-year labor cost allocation change in our Material Handling segment, described further in our segment-based discussion and analysis.

The consolidated gross profit for the nine months ended September 30, 2021 was 26.3%, a 1.0% increase from the 25.3% 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.

Consolidated general and administrative (G&A) expenses increased by $14.9 million to $75.1 million for the three months ended September 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 increases in certain sales-based expenses such as sales commissions and technician operating costs (i.e.

vehicle leases, repairs, and fuel), along with benefits-related costs from a rise in employees seeking healthcare postponed from 2020 due to the COVID-19 pandemic.

Further, certain temporary cost-saving measures were in place in the three months ended September 30, 2020, including but not limited to a reduction in executive-level compensation, 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 more acute phases of the COVID-19 pandemic, while such measures were not in place in the three months ended September 30, 2021.

Consolidated general and administrative (G&A) expenses increased by $58.0 million to $215.7 million for the nine months ended September 30, 2021 compared to the same period last year.

Other (expense) income:

Consolidated other expense for the three months ended September 30, 2021 was $(5.8) million compared to $1.9 million income for the same period in 2020.

This change was mainly attributed to the $8.0 million in key man life insurance proceeds received in the third quarter of 2020 as a result of the passing of our Construction Group President.

Consolidated other expense for the nine months ended September 30, 2021 increased by $12.6 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 realized in the nine months ended September 30, 2021 and the aforementioned key man life insurance proceeds received in the third quarter of 2020.

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.

The Company recorded an income tax provision of $0.0 million and benefit of $1.9 million for the three months ended September 30, 2021, and 2020, respectively.

Income tax provision for the nine months ended September 30, 2021 was $0.5 million compared to the income tax benefit of $3.4 million for the nine months ended September 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.

Preferred stock dividends were $0.7 million for the three months ended September 30, 2021.

This relates to the Company’s dividend payout on its Series A Preferred Stock that it issued on December 22, 2020.

The dividend payment paid on August 2, 2021, covered the period from and including April 30, 2021 through, but not including July 31, 2021.

Preferred stock dividends were $ 1.8 million for the nine months ended September 30, 2021.

Material Handling Results:

Three Months Ended

September 30,

Increase (Decrease)

Six months ended

Nine Months Ended

September 30,

Increase (Decrease)

16 unchanged sentences

Income from operations

Other income (expense)

Other (expense) income

Interest expense, floor plan payable – new equipment

Interest expense – other

Total other income (expense)

Total other (expense) income

Percent of Revenue

1 unchanged sentence

Material Handling

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

New and used equipment sales

9 unchanged sentences

Cost of revenue

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.

Material Handling segment revenues increased by 7.1% to $110.3 million for the three months ended September 30, 2021 as compared to the same period last year.

Overall, revenue streams were up primarily from the ScottTech acquisition, overall growth in PeakLogix’s design and build project revenue and a recovery from the COVID-19 impact that negatively influenced Material Handling revenues in the third quarter of 2020.

On an organic basis, and despite supply chain delays, new and used equipment sales increased 0.5%.

Aftermarket parts and service revenues increased 5.0% organically when comparing to the same period last year.

Rental revenue increased 14.2% on an organic basis from the same period last year as a result of improved fleet utilization and an increased rental rate environment.

Material Handling segment revenues increased by 20.2% to $328.7 million for the nine months ended September 30, 2021 as compared to the same period last year, attributable to the influence of the two acquisitions made in 2021 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,

Three Months Ended September 30,

Nine Months Ended September 30,

New and used equipment sales

3 unchanged sentences

Segment gross profit

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.

Material Handling gross profit for the three months ended September 30, 2021 increased 3.7% to 36.9% compared to the same period in 2020.

We realized improved new and used equipment gross margin in the third 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 September 30, 2021 are also attributable to Peaklogix and ScottTech’s influence, as their design and build projects realize higher margins than traditional lift truck sales.

We also realized an increase in rental revenue gross margin in the third 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 4.7% while the parts sales gross profit margins decreased by 1.3% in the third quarter of 2021 compared to the same period in 2020.

The service margin declines in the material handling segment can be primarily attributed to the historic allocation of technician labor cost in our New York City-based business to general and administrative expense versus cost of labor while they operated on their legacy accounting system.

On June 1, 2021, the business unit was fully integrated into our ERP platform and cost of technician labor is properly allocated for this quarter and will continue to be going forward.

Material Handling gross profit margins for the nine months ended September 30, 2021 increased 3.3% to 35.4% 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.

Material Handling general and administrative (G&A) expenses increased by $5.3 million to $36.1 million for the three months ended September 30, 2021 as compared to the same period last year.

This change was mainly driven by the ScottTech acquisition in Q1 2021 and higher employee benefit related expenses attributable to the growing number of medical expenditures, and the impact of increased technology expenses associated with the launch of our mobile tech platform for field technicians.

Additionally, many cost-saving measures were enacted in the second and third quarters of 2020 which assisted in defraying the reductions in revenue amid the most acutely impacted periods of the COVID-19 pandemic.

These measures were not in place during the three months ended September 30, 2021.

Material Handling general and administrative (G&A) expenses increased by 34.6% to $105.7 million for the nine months ended September 30, 2021, as compared to the same period last year for the same reasons as discussed above.

Other (expense) income:

Material Handling other expense decreased by $0.1 to $1.2 million for the three months ended September 30, 2021, as compared to the same period last year.

Material Handling other expense increased by $0.2 million to $3.8 million for the nine months ended September 30, 2021, as compared to the same period last year.

Construction Equipment Results

Three Months Ended

September 30,

Increase (Decrease)

Six months ended

Nine Months Ended

September 30,

Increase (Decrease)

15 unchanged sentences

Total general and administrative expenses

Income from operations

Other income (expense)

Income (expense) from operations

Other (expense) income

Interest expense, floor plan payable – new equipment

1 unchanged sentence

Other (expense) income

Total other income (expense)

Total other (expense) income

Percent of Revenue

1 unchanged sentence

Construction Equipment

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

New and used equipment sales

9 unchanged sentences

Cost of revenue

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.

Construction Equipment segment revenues increased by 57.1% to $184.7 million for the three months ended September 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.

The Construction Equipment segment, which was less operationally impacted by COVID-19 versus our Material Handling segment, was also quicker to recover from the impact of the COVID-19 pandemic than our Material Handling segment and from an equipment sales perspective has been relatively less impacted by the supply chain constraints.

On an organic basis, new and used equipment sales increased 65.8%, with a sharp increase in our Florida region, and parts and service revenues are up 14.8% 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 15.8%, and rental equipment sales increased 43.3% 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.

Sustaining our rental fleet size throughout the COVID-19 pandemic has proven beneficial to our 2021 results as we are well-positioned to secure rental and sales opportunities in a strong pricing environment.

Construction Equipment segment revenues increased by 65.0% to $527.8 million for the nine months ended September 30, 2021 as compared to the same period last year.

Gross profit (GP):

Three months ended June 30,

Six months ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

New and used equipment sales

3 unchanged sentences

Segment gross profit

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.

Construction Equipment gross profit increased by 2.8% to 21.9% in the three months ended September 30, 2021, from 19.1% compared to the same period in 2020.

New and used equipment sales margins as well as parts margins improved compared to the same period in 2020 amidst a supply-constrained marketplace causing retail prices to rise.

Service revenue margins were down 0.9% in the third quarter of 2021 compared to the same period in 2020, but remain 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 6.2% 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.

Construction Equipment gross profit increased by 1.2% to 20.7% in the nine months ended September 30, 2021, from 19.5% 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.

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.

Construction Equipment general and administrative (G&A) expenses increased by $9.0 million to $36.6 million for the three months ended September 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, alongside employee healthcare costs and growth in sales-related expenses such as commissions and the impacts of increasing technician headcount, such as vehicle costs.

Construction Equipment general and administrative (G&A) expenses increased by $35.1 million to $102.2 million for the nine months ended September 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.

Construction Equipment other expense increased by $1.2 million to $4.0 million for the three months ended September 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.

Construction Equipment other expense increased to $12.1 million for the nine months ended September 30, 2021, as compared to $7.8 million for the same period in 2020, primarily for the same reasons as discussed above.

Liquidity and Capital Resources

Six months ended June 30, 2021 compared with six months ended June 30, 2020 Cash Flows

Nine months ended September 30, 2021 compared with nine months ended September 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.

For the nine months ended September 30, 2021, operating activities resulted in net cash provided by operations of $4.1 million.

Our reported net loss of $20.1 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 $53.2 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.

Changes in working capital included $116.0 million of net new inventory purchased which was offset by transfers of $135.2 million to used and rental fleet, a $33 million increase in accounts receivable, $9.6 million unfavorable change in prepaid expenses and other assets and leases and other liabilities and $5.9 million in net payments related to manufacturer floor plans.

Cash flows from operating activities were favorably impacted by $97.6 million due to proceeds from the sale of rental equipment, a $17.8 million increase in accounts payable, accrued expenses, customer deposits, and other current liabilities.

For the nine months ended September 30, 2020, operating activities resulted in net cash used in operations of $44.8 million.

Our reported net loss of $20.8 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 $28.9 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.

Changes in working capital included a $102.8 million increase in inventories, $32.6 million in net payments on manufacturer floor plans, and an $8.6 million cash outflow in prepaid expense and other assets and other liabilities.

Cash flows from operating activities were impacted by a $48.2 million favorable change in proceeds from the sale of rental equipment, a $6.2 million favorable change in accounts receivable, and a $15.9 million cash inflows from accounts payable, accrued expenses, customer deposits, and other current 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.

For the nine months ended September 30, 2021, our cash used in investing activities was $40.4 million.

This was mainly due to $36.5 million purchases of rental equipment and non-rental property and equipment offset by proceeds from the sale of assets and $3.9 million use of cash for the recent ScottTech and Baron acquisitions and Howell and Vantage acquisitions working capital adjustments.

For the nine months ended September 30, 2020, our cash used in investing activities was $166.3 million.

This was mainly due to $128.8 million use of cash as a result of the 2020 acquisitions and $38.5 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.

For the nine months ended September 30, 2021, cash provided by financing activities was $36.3 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, $112.3 million of net payments under our lines of credits, net payments of $1.6 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.

For the six months ended June 30, 2020, cash provided by financing activities was $183.9 million.

a non-vendor), $2.6 million payments

on long term debt and capital lease obligations , $ 2.8 million payments related to preferred dividend and promissory notes, and $ 1.5 million of payments related to debt issuance costs .

For the nine months ended September 30, 2020, cash provided by financing activities was $211.2 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.

Net proceeds under our lines of credits and floor plans with an unaffiliated source (i.e.

a non-vendor) were $147.4 and $2.2 million, respectively.

Net proceeds under long-term debt amounted to $149.4 million.

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 $5.9 million and a $5.3 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.

The Company reported $1.2 million in cash for the nine months ended September 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”).

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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.

As of September 30, 2021, the Company had an outstanding revolving line of credit balance of $47.8 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.

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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.

As of September 30, 2021, the Company had an outstanding balance on their First Lien Floor Plan Facility of $33.8 million, excluding unamortized debt issuance costs.

Original Equipment Manufacturer (“OEM”) Captive Lenders and Suppliers’ Floor Plans

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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.

The total amount outstanding as of September 30, 2021 and December 31, 2020 was $ 197.4 million and $ 316.6 million, exclusive of debt issuance and deferred financings costs of $ 2.6 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%.

As of September 30, 2021, outstanding borrowings under the Senior Secured Second Lien Notes were $309.7 million, which included $5.3 million deferred financing costs and original issue discounts.

As of September 30, 2021, the effective interest rate on the Notes, taking into account the original issue discount, is 5.93%.

Cash Requirements Related to Operations

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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.

Our gross rental fleet capital expenditures for the period ended September 30, 2021 was approximately $166.1 million, including $ 135.2 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 $97.6 million for the period ended September 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.

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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.

As of September 30, 2021, we had $371.6 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.

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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.

As of September 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.

The terms of the guarantees range from two to six 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.

The estimated exposure related to these guarantees was $1.7 million and $2.4 million at September 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.

therefore, no amount has been accrued on the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020, respectively.

Critical accounting policies

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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.

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 .

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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 2. Management’s Discussion and Analysis