What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-31 compared with 2021-03-18 · 269 added, 212 removed, 267 unchanged (64% of the section changed)

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Alta assumes no obligation to update any of these forward-looking statements.

The COVID-19 pandemic has created significant volatility in the global economy and resulted in significant disruptions to our business in the year ended December 31, 2020.

The extent and duration of the COVID-19 impact on our operations and financial position, and on the domestic and global economy, remain uncertain.

Prior to mid-March 2020, our performance was generally in accordance with our expectations.

In mid-March 2020, the Company started to see a slowdown in its business activity, initially and primarily in the automotive industry and in the state of Michigan due to its customers being impacted by the COVID-19 pandemic.

This slowdown reached its most acute level midway through the second quarter.

In mid-May as state and local officials began easing quarantine and “stay at home” orders we saw an increase in business activity levels that continued to trend positively through the remainder of the second quarter.

Generally, our business activity levels stabilized in the third quarter to near pre-COVID levels, and then held at or went beyond pre-COVID levels towards the end of the year, other than our rental fleet utilization, which continued to lag 2019 levels.

Based on current business levels, we believe the worst of the pandemic’s effect on our business to be behind us.

Notably, the Company was classified as “essential businesses” and our branch infrastructure has remained operational, with minimal disruptions, since the beginning of the COVID-19 pandemic.

Additionally, many of our customers in human sustenance, food and beverage, e-commerce, medical supplies and construction were also deemed “essential” early on in the pandemic.

Starting in mid-March 2020 we took several actions to address the pandemic and the directives of governmental authorities in the state and local geographic areas in which we have operations.

These actions included those described below:

Remote Work Arrangements

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

In late second quarter of 2020, we phased in a return to more normalize working conditions as state or local governments began lifting restrictions.

Despite the lifting of certain restrictions, Alta continues to adhere to government issued guidelines and promote a clean and safe environment in all of its branch locations.

Where and when applicable, certain non-revenue producing business functions have been able to operate via remote work arrangements which have been designed to allow for the continued operation of our business while allowing employees to work virtually.

Safety Protocols

We have established new safety protocols intended to help protect the health and safety of our workforce as many of them have continued to provide services to our customers in the field or within our branch infrastructure during the COVID-19 outbreak.

The protocols comport with state and local guidelines and include, requiring face mask use in our facilities, providing additional personal protective equipment when job requirements do not permit following social distancing guidelines and rigorous facility cleaning protocols.

Although we, and certain segments of our customer base, were deemed an “essential” business in all of our geographies, many of our customers were drastically impacted by COVID-19, which led to an adverse effect on the Company’s financial performance throughout the last three quarters of 2020, with the second and third quarters of 2020 realizing the most significant impact.

In order to preserve our liquidity, during the second quarter of calendar year 2020, our senior executive officers volunteered to accept pay reductions, we implemented an employee furlough program and took various other cost savings measures to prioritize preserving our liquidity position.

We believe the measures we took were prudent and successful in helping to preserve our liquidity

As business conditions and customer demand returned to more normalized levels, many of these cost savings measures and furlough programs were removed and eliminated in the third quarter.

While our sales and services related operations are performing at pre-COVID levels, our rental fleet utilization has lagged pre-COVID performance which prevented the Company from generating an optimal level of cash flow commensurate with pre-COVID levels in the fourth quarter.

The Company will continue to monitor utilization and, in-turn, rationalize rental fleet levels to match expected demand in 2021 and through the end of COVID-19 pandemic.

We believe that the acquisitions and investments made in the calendar year 2020 expanded our service capabilities, geographic reach, end market diversification and product offerings;

The economic volatility and disruptions caused by the COVID-19 pandemic caused an adverse effect on our business and our financial results in fiscal year 2020 and early 2021.

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 and departments, have gone 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 currently COVID-19 is not impacting our business activity levels and we believe the worst of the pandemic’s effect on our business to be behind us, uncertainty remains regarding the potential future emergence of additional variant strains of COVID-19 and how those variant strains would impact the macroeconomic environment and our business.

While our operations in 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 2022 and through the end of the COVID-19 pandemic.

We believe that the acquisitions and investments made in the calendar years 2020 and 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.

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

Our Board of Directors and management team continues to monitor and evaluate the continuing impacts of the COVID-19 pandemic on our business and operations, to the extent business conditions regress from current levels we may take additional actions to further reduce costs and/or seek additional financing to bolster our liquidity position.

While we have sufficient liquidity to fund our operations currently, our Board of Directors and management team continues to monitor and evaluate the continuing impacts of the COVID-19 pandemic on our business and operations, and to the extent business conditions regress from current levels we may take additional actions to further reduce costs and/or seek additional financing to bolster our liquidity position.

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 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 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), 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.

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 and began 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”);

(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 $50 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.

On December 20, 2021, the Company entered into a First Amendment to the Amended and Restated Floor Plan Credit Agreement, which increased its maximum borrowing capacity to $50 million and increased its credit line borrowing capacity on all OEM floor plan facilities up to $350 million.

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.

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, earthmoving equipment, cranes, paving and asphalt equipment and other material handling and construction equipment.

We engage in five principal business activities in these equipment categories:

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equipment rentals.

We have operated as an equipment dealership for over 35 years and have developed a branch network that includes 54 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, 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.

We have operated as an equipment dealership for over 37 years and have developed a branch network that includes 64 total locations in Michigan, Illinois, Indiana, Ohio, Massachusetts, Maine, Connecticut, New Hampshire, Vermont, New York, Virginia and Florida.

We offer our customers a one-stop-shop for their equipment needs by providing sales, parts, service, and rental functions under one roof.

More recently, with the acquisitions of PeakLogix, Inc.

(“PeakLogix”) in June 2020 and ScottTech, LLC (“ScottTech”) in March 2021, we have entered 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 e-commerce and logistics.

Within our territories, we are the exclusive distributor of new equipment and replacement parts on behalf of our OEM partners.

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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, NITCO, 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, and Florida.

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.

The material handling segment is made up of the legal entities Alta Industrial Equipment Michigan, LLC, Alta Industrial Equipment Company, LLC, Alta Material Handling New York State, 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, Ohio, 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, Alta Construction Equipment Ohio, LLC, Alta Construction Equipment New England, LLC, Alta Mine Services, LLC, and Alta Construction Equipment New York, LLC.

Ginop Sales, Inc.

is the wholly-owned subsidiary of Alta Kubota Michigan, LLC which is the wholly-owned subsidiary of Alta Construction Equipment, 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

In addition to being a holding company, Alta Enterprises, LLC also holds corporate debt, debt extinguishment fees, deferred taxes, income tax provision, transaction costs associated with the reverse recapitalization and our preferred stock , and has minor operational activity all together.

Vantage Equipment, LLC

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 companies, the Corporate entities also hold 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, interest expense associated with original issue discounts and deferred financing cost related to previous capital raises and the Company’s income tax provision.

In connection with the purchase of NITCO LLC in 2019, the Company expanded its full-service material handling and construction equipment dealer operations into New England market.

Given that the sales of the business were more heavily weighted to material handling versus construction and that NITCO’s reporting systems made it difficult for the construction business to be observed separate from the material handling operation, NITCO’s total financial results were historically presented within our material handling 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.

On December 31, 2021, the Company acquired the stock of Ginop, a privately held compact construction and agricultural equipment distributor, for a total purchase price of $30.2 million which includes $0.9 million of the potential $1.5 million additional earn-out payments tied to post closing performance of the Ginop business.

Alta acquired $0.7 million of cash and $0.3 million of estimated excess working capital in the transaction, yielding an enterprise value of approximately $29.2 million.

The acquisition strengthens our construction product and service offerings in Northern Michigan and expands our relationship with Kubota.

On December 31, 2021, the Company acquired the assets of Ambrose, a privately held construction equipment distributor, for a total purchase price of $13.1 million, including a $2.8 million purchase price adjustment due to working capital.

The Company acquired $0.2 million of cash and $0.6 million of estimated working capital deficit in the transaction, yielding an enterprise value of approximately $13.5 million.

Ambrose is the Northeast’s premier asphalt equipment dealer for more than 33 years, with locations in New Hampshire and Massachusetts.

On December 1, 2021, the Company acquired the assets of Midwest Mine for a total purchase price of $6.9 million.

Midwest Mine fabricates and installs full aggregate processing plants for quarries, mines, and recycling operations throughout the United States and is well-established in the Ohio and Michigan markets.

On October 1, 2021, the Company acquired the assets of Gibson, a privately held premium equipment distributor, for a total purchase price of $10.6 million.

The acquisition included $1.2 million of floorplan-eligible new equipment inventory and the Company assumed $4.4 million of equipment financing at closing, yielding an enterprise value at close of approximately $13.8

Gibson expands our geographic footprint and presence into Ohio and broadens our construction equipment product portfolio, OEM relationships, and service offerings.

On September 1, 2021, the Company acquired Baron, a privately held dock & door business, 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.

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.

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 $22.6 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 $22.4 million.

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

On October 30, 2020, the Company acquired the assets of Howell Tractor, 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.

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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.

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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.

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.

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.

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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.

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.

Northland Industrial Truck Co., Inc.

On May 1, 2019, we purchased the assets of Northland Industrial Truck Company, Inc., a material handling equipment dealer in New England for a total purchase price of $65.6 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 $42.1 million.

The acquisition expanded our business into the New England market, diversifies our end market exposure, and provided Alta a growth platform on the East Coast of the United States.

The acquisition added a best-in-class full-service materials handling and construction equipment dealer with operations in Massachusetts, Connecticut, New Hampshire and Maine.

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

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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, we provide warehouse design, automated equipment installation and system integration solutions.

We also sell tangential products related to our material handling equipment offerings and, with the acquisition of PeakLogix and ScottTech, we provide warehouse design capabilities, automated equipment installation, system integration solutions 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.

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 financing lease arrangement that we purchase from the financing company, or used equipment that is sourced for our customers in the open market by our used equipment specialists.

Used equipment sales made in our territories, like new equipment sales, generate parts and services business for the Company, as well.

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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 $451.7 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.

The original acquisition cost of our rental fleet excludes the $9.7 million 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.

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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.

Operational costs include marketing activities, costs associated with deploying, maintaining and leasing our service vehicle fleet, insurance, information technology, office and shop supplies, general corporate costs, depreciation of non-sales and rental related assets, and intangible amortization.

Occupancy costs are comprised of all expenses related to our facility infrastructure, 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.

This section of the income statement 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 our second lien secured notes.

Also included in this section of the financials are non-recurring costs, in particular expenses associated with the extinguishment of debt.

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Consolidated Results

Years ended December 31,

Increase (Decrease)

Percent of Revenue

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Rental revenue

Rental depreciation and amortization

Rental depreciation

Rental equipment sales

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Total general and administrative expenses

(Loss) income from operations

Other income (expense)

Income (loss) from operations

Other (expense) income

Interest expense, floor plan payable – new equipment

Interest expense – other

Change in fair market of warrants

Loss on extinguishment of debt

Total other income (expense)

Total other (expense) income

Loss before taxes

Income tax benefit

Income tax provision (benefit)

Preferred stock dividends

Net loss available to common shareholders

Consolidated revenues increased by $339.2 million, or 38.8%, to $1,212.8 million for the year ended December 31, 2021 as compared to the previous year.

The primary drivers of the year over year increase were the favorable impact from the acquisitions completed in 2020 of Flagler, Liftech, PeakLogix, Hilo, Martin, and Howell, along with the impact of full period results from the acquisition of NITCO in May 2019.

The Vantage acquisition, although completed in 2020, has no impact to the 2020 revenues due to its closing date of December 31, 2020.

Excluding the effects of acquisitions, new and used equipment sales increased on an organic

basis by approximately 7.0% within our existing markets.

Service and parts revenue s similarly increased on an organic basis year over year by 2.6% mainly driven by demand for ongoing maintenance on equipment previously sold to our customers.

On an organic basis, service and parts revenues increased 4.9 % and 0.1 %, respectively.

While equipment sales and our aftermarket service and parts revenue s increased organically year over year , rental revenue decreased on an organic basis despite growing 24.8% overall when factoring in the impact of acquisitions.

As the impact of COVID-19 became more widespread in March 2020, our equipment rental utilization and sales volumes began to decline as certain of our customers suspended operations or delayed project starts.

T h e decline in rental performance, when compared to prior years, began in the second quarter of 2020, and continued to lag 2019 performance in the third and fourth quarters of 2020 .

However, the rental performance lag versus prior years incrementally improved through the second half of 2020.

Even with sequential improvements in the second half of 2020 , our organic rental revenues for the year ended December 31, 2020, were 7.5 % lower than those of the year ended December 31, 2019.

In the fourth quarter of 2020, similar to prior years, we saw a notabl e increase in the sales of our rental equipment, which leads to more optimized fleet levels as we begin 2021.

Drivers of this period over period increase include the favorable full period impact from the acquisitions completed in 2020, organic growth coming from the favorable business climate existing in 2021, and the relative impact COVID-19 had on the 2020 comparative period.

The acquisitions completed during 2021 had some impact on the period over period revenue increase, but because the majority of these acquisitions occurred in the fourth quarter of the calendar year, the overall impact on the annual results were relatively minor in comparison to the other drivers identified In 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 7.7% over prior year as market demand for equipment rebounded in 2021, but lead time delays within the supply chain limited our ability for even greater new equipment throughput, resulting in a large sales order backlog.

Organic parts and service revenues increased by 10.1% and 11.0%, respectively, over last year, as the impact of COVID-19 had a negative impact on the aftermarket revenue streams in 2020.

Similarly, rental revenue exhibited growth on an organic basis of 8.7% over last year as physical utilization trends improve and rental rates have increased amidst industry-wide delays in new equipment deliveries.

Lastly, rental equipment sales increased organically by 13.4% as customer demand grew in the year for lightly used equipment while lead times for new equipment have been extended amid the global supply chain issues impacting many equipment 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.

Gross profit (GP):

Years ended December 31,

Year Ended December 31,

New and used equipment sales

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Consolidated gross profit

Consolidated gross profit decreased by 2.7% from 27.3% in the year ended December 31, 2019 to 24.6% in the same period in 2020.

The overall gross profit margin declined due to a combination of a sales mix change year over year toward lower-margin sales channels such as new and used equipment sales.

A portion of the sales mix change can be attributed to our acquisitions, however, COVID-19 contributed to the mix change as well.

As mentioned previously, reduced year-over-year utilization of our rental fleet, resulting from factors attributed to COVID-19 and the surrounding macroeconomic factors, combined with fixed depreciation expense contained within rental cost of revenues on certain product categories of our rental fleet, thereby compressing margins, also had an impact on gross profit margin in 2020.

The reductions were partially offset by improved new and used equipment margins, mainly in our Material Handling segment.

Additionally, and expectedly, parts and service gross margins regressed, in part due to the relative sales mix between the Construction and Material Handling segments.

Consolidated gross profit increased by 1.3% from 24.6% in the year ended December 31, 2020 to 25.9% over the same period in 2021.

New and used equipment sales as well as rental equipment sales margins improved in 2021 compared to last year as retail pricing levels increased 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 in 2021 versus 2020.

We realized an increase in rental revenue gross margin in 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.

Parts sales gross margins were down modestly year-over-year primarily due to the mix of revenue being more heavily weighted to our construction segment where parts gross margins are lower when compared to our material handling segment, relatively speaking.

Additionally, 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.

General and Administrative expenses:

Consolidated general and administrative (“G&A”) expenses increased by 58.5% to $222.6 million for the year ended December 31, 2020 as compared to the same year last year.

This increase was mainly attributable to the seven acquisitions that were closed throughout 2020 along with consolidated full period results of NITCO in 2020.

Additionally, the Company incurred $7.6 million of transaction costs associated with activities directly attributable to the reverse recapitalization, $3.6 million share-based compensation expense mainly due to the immediate vesting of restricted stock units in the third quarter related to the passing of our Construction Group President.

Outside of the reverse recapitalization, share based compensation and acquisition activities, G&A expenses also increased in support of enterprise-wide growth as notable portion of our G&A expenses are variable in nature.

Other Income (expense):

Consolidated other expense decreased by $24.6 million for the year ended December 31, 2020 compared to the same period last year.

The favorable change was primarily attributable to $8.0 million in key man life insurance proceeds as a result of the passing away of our Construction Group President.

This was offset by higher borrowings associated with the reverse recapitalization and acquisition related activities during year.

Additionally, in 2019, the Company incurred $27.9 million expense as a result of the recognition of an increase in the fair value of warrants held by a former minority shareholder.

The increase in fair value was triggered by the implied valuation of the company in the reverse recapitalization.

Provision for income taxes:

Income tax benefit for the year ended December 31, 2020 was $6.6 million compared to $0 for the year ended December 31, 2019, which was prior to the reverse recapitalization.

This benefit was the result of the level of pre-tax loss for the period from February 14, 2020 to December 31, 2020.

Consolidated general and administrative (“G&A”) expenses increased by 33.2% to $296.4 million for the year ended December 31, 2021 as 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), benefits-related costs from a rise in employees seeking healthcare postponed from 2020 due to the COVID-19 pandemic, along with various incremental administrative and information technology costs that relate to onboarding and integrating acquired companies onto our operating platform which we believe will yield long-term operating efficiencies and benefits from a risk management perspective.

Further, certain temporary cost-saving measures were in place during 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 2021.

Lastly, consolidated G&A includes expenses related to professional and outside services related to acquiring and then integrating our acquisition targets, and professional services related to capital raising activities, both of which are non-recurring expenses in nature.

Other (expense) income:

Consolidated other expense increased by $12.7 million for the year ended December 31, 2021 compared to the same period last year.

The unfavorable change was primarily attributable to $8.0 million in key man life insurance proceeds received in 2020 as a result of the passing away of our Construction Group President and higher debt extinguishment costs incurred in 2021.

Additionally, the year over year change was also attributable to the $11.9 million loss on debt extinguishment realized for the year ended December 31, 2021 compared to the same period last year.

Provision (benefit) for income taxes:

Income tax provision for the year ended December 31, 2021 was $ 3.6 million compared to $ 6.6 million benefit for the year ended December 31, 2020 .

This change is due to establishing a valuation allowance in 2021 against the deferred tax assets associated with losses for which we may not realize a related tax benefit.

The benefit in 2020 was the result of the level of pre-tax loss for the period from February 14, 2020 to December 31, 2020.

Preferred Stock Dividend:

Preferred stock dividends were $2.6 million for the year ended December 31, 2021.

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

Material Handling Results

Years ended December 31,

Percent of Revenue

Material Handling

2020 versus 2019

Increase (Decrease)

2021 versus 2020

7 unchanged sentences

Rental revenue

Rental depreciation and amortization

Rental depreciation

Rental equipment sales

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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

Material Handling

Year Ended December 31,

New and used equipment sales

Service revenue

Rental revenue

Rental equipment sales

Cost of revenues:

New and used equipment sales

Service revenue

Rental revenue

Rental depreciation

Rental equipment sales

Cost of revenue

Material handling segment revenues increased by 22.9% to $467.5 million for the year ended December 31, 2021 as compared to the same period last year.

All revenue streams were increased primarily due to the numerous acquisitions in 2020 and consolidated full period results of NITCO in 2020 relative to 2019.

In 2020, we experienced a reduction in customer demand, specifically in parts, service and rental, reflective of the impact of the COVID-19 pandemic on several of our end markets in the Material Handling segment.

This was partially offset by the continuity of many of our customers in the medical, warehousing, and distribution industries, among other “essential business” customers that we serve, and the recovery of business operations for our most impacted customers in the second half of the year.

Overall, revenue streams were up primarily from the economic recovery from the COVID-19 pandemic that negatively influenced material handling revenues in 2020, along with the impact of acquisitions made in both 2020 and 2021, more specifically the growth attributed to our design and build and system integration project revenues resulting from the acquisition of PeakLogix and ScottTech.

On an organic basis, focusing only on the material handling entities that were fully operational over both comparable timeframes of the 2020 and 2021 calendar years, and despite supply chain delays, new and used equipment sales increased 3.1%.

Aftermarket parts and service revenues increased 8.0% organically when comparing to the same period last year.

Rental revenue increased 6.7% on an organic basis from the same period last year as a result of improved fleet utilization and an increased rental rate environment.

Gross profit (GP):

Years ended December 31,

Material Handling

Year Ended December 31,

New and used equipment sales

2 unchanged sentences

Rental equipment sales

Consolidated gross profit

Material Handling gross profit declined slightly to 30.7% in the year ended December 31, 2020 from 31.9% compared to the same period in 2019.

New and used equipment margins benefited from the addition of PeakLogix to the sales mix and improved sales of higher margin allied and specialized product offerings.

Further, used equipment sales margins showed an improvement over the previous year.

Rental revenue margins declined comparably as a result of reduced utilization of our rental fleet and the fixed

depreciation on our Material Handling rental fleet.

With the reduction in utilization, rental fleet expenses such as repairs and maintenance and subleasing costs increased as a percentage of revenue to drive the depressed margin in the department year over year .

Parts and service gross profit experienced a modest decline year over year but are generally aligned with expectations despite lower sales volume in these departments .

Segment gross profit

Material Handling gross profit increased to 34.5% in the year ended December 31, 2021 from 31.9% compared to the same period in 2020.

We realized improved new and used equipment gross margin in 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 are also attributable to Peaklogix and ScottTech’s influence on the segment, as their design and build and system integration projects realize higher relative margins than traditional lift truck sales.

We also realized an increase in rental revenue gross margin in 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 2.4% while the parts sales gross profit margins decreased by 1.6% in 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 since this date.

A decline in rental equipment sales gross margins was noted year over year, but as rental equipment sales in the material handling segment represent a minor component of the total sales volume, such volatility in margin is not unusual, nor is it a material enough contributory factor of the segment to warrant any concern.

General and administrative expenses:

Material handling general and administrative (“G&A”) expenses increased by 32.9% to $145.8 million for the year ended December 31, 2021 as compared to the same period last year.

This increase was primarily attributable to the acquisitions of Liftech, PeakLogix and Hilo in 2020 along with consolidated full period results of NITCO in 2020 relative to 2019.

At the onset of the COVID-19 pandemic, the Material Handling segment initiated immediate cost mitigation in the form of pay reductions, employee furlough programs and reductions in benefits.

As state and local restrictions lifted and business activities resumed, employee pay and benefits were reestablished to previous levels, and employees were sequentially called back from furlough in the third quarter of the year.

Other Income (expense):

Material Handling other expense increased by $0.9 million to ($5.1) million for the year ended December 31, 2020 as compared to the same period last year.

This was primarily due to interest expense increasing by $1.1 million to ($5.7) million.

This change was mainly the result of the addition of acquisition debt related to the purchase of Liftech, PeakLogix and Hilo during the year, as their assets were financed via our line of credit and floorplan facilities and interest expense was allocated to the segment accordingly.

This change was mainly driven by the full year impact in 2021 of the Peaklogix and Hilo acquisitions, which were June and July 2020 acquisitions, respectively, and the ScottTech and Baron acquisitions which closed during the first and third quarters of 2021, respectively.

Also driving the incremental increase are increases in certain variable costs like sales-based expenses such as sales commissions and technician operating costs (i.e.

vehicle leases, repairs, and fuel) as the business scales organically.

Additionally, higher employee benefit related expenses attributable to the growing number of medical expenditures in 2021 when compared to 2020, and the impact of increased technology expenses are also leading to year over year increases.

Lastly, 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 2021.

Other (expense) income:

Material handling other expense increased by $0.6 million to $5.2 million for the year ended December 31, 2021 as compared to the same period last year primarily due to higher interest expense, which is largely associated with the draws made against the ABL credit facility to support the acquisition activities of the segment.

Construction Equipment Results

Years ended December 31,

Percent of Revenue

2020 versus 2019

Increase (Decrease)

2021 versus 2020

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Rental revenue

Rental depreciation and amortization

Rental depreciation

Rental equipment sales

3 unchanged sentences

Total general and administrative expenses

(Loss) income from operations

Other income (expense)

Income (loss) from operations

Other (expense) income

Interest expense, floor plan payable – new equipment

Interest expense – other

Total other income (expense)

Other (expense) income

Total other (expense) income

Percent of Revenue

Construction Equipment

Year Ended December 31,

New and used equipment sales

Service revenue

Rental revenue

Rental equipment sales

Cost of revenues:

New and used equipment sales

Service revenue

Rental revenue

Rental depreciation and amortization

Rental equipment sales

Cost of revenue

Construction equipment segment revenues increased by 51.1% to $745.3 million for the year ended December 31, 2021 as compared to the same period last year.

This increase was primarily attributable to the Flagler, Martin and Howell acquisitions that occurred in the first, third and fourth quarters of 2020, respectively.

Organically, all revenue streams improved over the prior year with the exception of rental revenues.

New and used equipment sales increased organically year over year by 22.4%, and the aftermarket sales departments of parts and service increased by 13.6% organically.

Our rental revenues were unfavorably impacted by weaker utilization metrics as a result of the macroeconomic factors surrounding and related to the COVID-19 pandemic.

equipment being returned and utilization suffering, we focused on a fleet sales effort concentrated in the fourth quarter to increase rental equipment sales, achieving over $12 .0 million increase organically in rental equipment sales in the fourth quarter of 2020 over the same period in 2019.

This increase was mainly attributable to organic growth in the segment and the impact of the full period results from the Flager, Martin, Howell Tractor, and Vantage acquisitions that occurred throughout 2020.

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 and, from an equipment sales perspective, was relatively less impacted by the supply chain constraints in 2021.

On an organic basis, new and used equipment sales increased 15.0%, and parts and service revenues are up 16.7% when comparing to the same period last year, as technician headcount increased on an organic basis.

Rental revenue has increased on an organic basis of 10.6%, and rental equipment sales increased 27.0% 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 our 2021 results as we are well-positioned to secure rental and sales opportunities in a strong pricing environment.

Of further note, and although not included in the organic figures mentioned above due to the acquisition occurring in February 2020, our Florida region has contributed significantly to the overall growth in the segment.

If annualizing the regional results for 2020 and comparing them to the actual 2021 results, the Florida region of the construction segment has experienced year over year revenue growth of close to 50%, exceeding double digit growth in each of the key revenue categories.

Gross profit (GP):

Years ended December 31,

Year Ended December 31,

New and used equipment sales

2 unchanged sentences

Rental equipment sales

Consolidated gross profit

Construction Equipment gross profit decreased by 3.0% to 18.5% for the year ended December 31, 2020, from 21.5% compared to the same period in 2019.

A decline in rental revenue gross margin was the main driver in the overall depressed margin.

Rental margins decreased primarily due to the acquisition of Flagler in the first quarter of 2020.

Flagler’s rental fleet, when compared to the rental fleet that existed prior, is more heavily weighted to larger capacity construction equipment which we depreciate at a higher rate than lower capacity construction equipment Secondarily, the combination of reduced utilization of our rental fleet, due to COVID-19 and the fixed depreciation expense on certain product categories of our rental fleet also contributed to this reduction in gross margin.

Service and parts gross margins, decreased year-over-year, due to acquisition of Flagler in the first quarter of 2020, where the mix of service and parts revenue is more heavily weighted toward lower-margin warranty work and where best practices in the service department continue to be implemented.

Segment gross profit

Construction equipment gross profit increased by 1.7% to 20.6% for the year ended December 31, 2021, from 18.9% 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.

An increase in rental revenue and rental equipment sales gross margins were the main drivers in the overall improved margin.

Rental margins increased primarily due to improved utilization and a rising rental rate environment in 2021 when compared to the COVID-19 impacted 2020.

Service gross margins decreased modestly year-over-year, primarily as a result of the compressed margins on warranty work.

General and Administrative expenses:

Construction equipment general and administrative (G&A) expenses increased by 41.4% to $140.0 million for the year ended December 31, 2021 as compared to the same period last year.

The increase was primarily due to the impact from the acquisitions of Flagler, Martin, and Howell.

In addition to the acquisitions, the Construction Equipment segment incurred $3.0 million stock compensation expense mainly due to the immediate vesting of the restricted stock units for the passing of its Construction Group President.

Additionally, G&A expenses also increased in support of growth in certain departments and geographies, as notable portion of our G&A expenses are variable in nature.

Other Income (expense):

The year over year increase was mainly attributable to the full period G&A impact as a result of the construction segment acquisitions of Flagler, Martin, Howell Tractor, and Vantage throughout 2020.

Also driving the incremental increase are increases in certain variable costs like sales-based expenses such as sales commissions and technician operating costs (i.e.

vehicle leases, repairs, and fuel) as the business scales organically.

Other (expense) income:

Construction equipment other expense increased to $16.1 million for the year ended December 31, 2021 as compared to the same period last year.

This was primarily due to interest expense increasing by $2.8 million to ($10.6) million respective to the Flagler, Martin, and Howell acquisitions, as these assets were financed via our availability on our line of credit and floorplan facilities.

The year over year 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.

Liquidity and Capital Resources

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For the year ended December 31, 2020, operating activities resulted in net cash used in operations of $35.0 million.

Our reported net loss of $35.4 million, when adjusted for non-cash income and expense items, such as depreciation and amortization, paid-in-kind interest, provision for losses on accounts receivable, and the change in the fair value of the warrants, provided positive cash flows of $46.8 million.

These cash flows from operating activities were offset by cash outflows attributable to a $23.2 million increase in accounts receivable, a $72.2 million increase in inventories, and a $2.0 million increase in prepaid expenses and other assets.

Cash flows from operating activities were positively impacted by a net $42.2 million due to proceeds from sale of rental equipment, $18.8 million increase in accounts payable, accrued expenses, customer deposits, and other current liabilities, and a $0.6 million

increase in liabilities associated with sale contracts containing guaranteed purchase obligations and other liabilities.

Additionally, net payments on manufacturer floor plans decreased cash flows by $16.5 million.

Our reported net loss of $24.0 million, when adjusted for non-cash income and expense items, such as depreciation and amortization, former debt extinguishment, provision for losses on accounts receivable, and the share-based payments, provided net cash inflows of $43.8 million.

Changes in working capital included a $136.5 million increase in inventories, $38.0 million in net payments on manufacturer floor plans, and a $6.8 million increase in accounts receivable and prepaid expenses and other assets.

Cash flows from operating activities were favorably impacted by $86.4 million due to proceeds from sale of rental equipment, and a $16.1 million favorable change in accounts payable, accrued expenses, customer deposits, leases and other liabilities.

Cash Flow from Investing Activities .

For the year ended December 31, 2021, our cash used in investing activities was $113.4 million.

This was mainly due to $180.0 million use of cash as a result of the recent acquisitions and $44.5 million purchases of rental equipment and non-rental property and equipment offset by proceeds from the sale of assets.

This was mainly due to $63.4 million use of cash as a result of the recent acquisitions and $50.0 million purchases of rental equipment, non-rental property and equipment, and equipment contracted under guaranteed purchase obligations offset by proceeds from the sale of assets.

For the year ended December 31, 2020, our cash used in investing activities was $227.9 million.

The acquisition of NITCO totaled $65.6 million and purchases of rental and non-rental equipment totaled approximately $22.3 million.

This was mainly due to $180.0 million use of cash as a result of the 2020 acquisitions and $47.9 million purchases of rental equipment, non-rental property and equipment, and equipment contracted under guaranteed purchase obligations offset by proceeds from the sale of assets.

Cash Flow from Financing Activities.

For the year ended December 31, 2021, cash provided by financing activities was $83.8 million.

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

a non-vendor) were $59.4 million and $4.8 million, respectively.

Net proceeds from issuance of notes amounted to $310.2 million.

This was partially offset by payments related to the extinguishment of former debt which totaled $153.1 million, expenditures of debt issuance costs of $1.7 million, $3.8 million of payments on long term debt and finance lease obligations, and promissory note and dividend payments totaling $3.60 million.

For the year ended December 31, 2020, cash provided by financing activities was $264.1 million.

The favorable impact was mainly due to $175.7 million proceeds from the completion of the reverse recapitalization.

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Additionally, we had cash inflows as a result of proceeds from issuance of common stock and preferred stock of $32.2 million and disgorgement of short swing profits of $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 $7.9 million payment on long term debt and capital lease obligations.

For the year ended December 31, 2019, cash provided by financing activities was $91.8 million.

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

a non-vendor) for the year ended December 31, 2019 were $44.7 million and $40.1 million, respectively.

Additionally, net proceeds under long-term debt amounted to $8.0 million, partially offset by payments on capital lease obligations of $0.9 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, a $7.9 million payment on long term debt and finance lease obligations.

Sources of Liquidity

The Company reported $2.3 million in cash as of December 31, 2021.

In conjunction with the reverse recapitalization, effective February 14, 2020, the Company amended and restated its credit facility with its first lien lender by entering into the Fifth 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.

On April 1, 2021, the Company c ompleted a private offering of $315 million of its 5.625% Senior Secured Second Lien Notes due 2026 (the “Notes”).

Morgan Securities LLC, as representative of the initial purchasers.

The Notes are guaranteed by the g uarantors on a second lien, senior secured basis.

The Notes were issued pursuant to an indenture dated April 1, 2021 among the Company, the g uarantors 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.

In connection with the Amended and Restated Credit Agreement, the Company amended and restated its floor plan facility with its first lien lender by entering into the Fifth 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, Sole Bookrunner and Sole Lead Arranger.

The Amended and Restated Credit Agreement, among other things, (i) moved the $85 million floor plan financing facility of the Fourth Amended and Restated First Lien Credit Agreement out of syndication and into the Floor Plan Credit Agreement, (ii) increased the total aggregate amount of allowed indebtedness of all floor plans from $220 million to $225 million, (iii) increased the revolving line of credit borrowing capacity from $110 million to $300 million, and (iv) modified financial covenants (as defined in the Amended and Restated Credit Agreement).

The Floor Plan Credit Agreement, among other things, (i) modified the floor plan financing facility with the Company’s first lien lender from $85 million to $40 million, and (ii) modified financial covenants (as defined in the Floor Plan Credit Agreement).

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, and 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 $50 million, as a result of the December 20, 2021 First Amendment to the Amended and Restated Floor Plan Credit Agreement, 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 Floor Plan First Lien Lender

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 $300 million and interest cost is the London Interbank Offered Rate (“LIBOR”) plus an applicable margin or the CB Floating Rate, depending on the borrowing.

The revolving line of credit has a maximum borrowing capacity of $350 million and interest cost is the Secured Overnight Financing Rate (“SOFR”) plus an applicable margin or the CB Floating Rate, depending on the borrowing.

As of December 31, 2021, the Company had an outstanding revolving line of credit balance of $100.7 million, excluding unamortized debt issuance costs.

The Company has a floor plan financing facility with its first lien lender to finance new and used inventory and rental fleet equipment.

This floor plan has a maximum borrowing capacity of $40 million.

At December 31, 2020, the Company had an outstanding balance on their first lien lender floor plan facility of $35.3 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 $50 million.

The interest cost for the First Lien Floor Plan Facility is SOFR plus an applicable margin.

The First Lien Floor Plan Facility is collateralized by substantially all assets of the Company.

As of December 31, 2021, the Company had an outstanding balance on their First Lien Floor Plan Facility of $30.6 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 $ 750 million.

The total amount outstanding as of December 31, 2020 was $316.6 million, exclusive of debt issuance and deferred financings costs of $1.5 million.

In connection with the reverse recapitalization, the Company entered into a new Note Purchase Agreement (the “Term Loan”) dated as of February 3, 2020, for the purposes of, among other things, (i) financing the reverse recapitalization, (ii) financing the acquisition of Flagler and Liftech, and (iii) providing for the repayment and refinance of a portion of the Company’s prior existing debt.

The Term Loan has an aggregate principal amount of $155.0 million and has second lien priority and the Company’s assets, with an initial maturity date of August 2025.

In connection with the new Note Purchase Agreement, the Company retired its existing term loan facility.

The term loan is payable in quarterly installments of $1.9 million plus interest at LIBOR plus 8%.

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

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

The total amount outstanding as of December 31, 2021 and December 31, 2020 was $ 255.6 million and $ 316.6 million, exclusive of debt issuance and deferred financings costs of $ 2.4 million and $1.5 million, respectively

Senior Secured Second Lien Notes

As of December 31, 2021, outstanding borrowings under the Senior Secured Second Lien Notes were $310.0 million, which included $5.0 million deferred financing costs and original issue discounts.

As of December 31, 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 year ended December 31, 2020 was approximately $159.4 million, including $117.9 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 $86.4 million for the year ended December 31, 2020 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 December 31, 2021 was approximately $207.6 million, including $165.3 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 $144.5 million for the period ended December 31, 2021 as our business model is to sell lightly used inventory to customers from our rental fleet 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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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.

Critical A ccounting P olicies

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 December 31, 2021, there was $3.4 million in outstanding letters of credits issued in the normal course of business.

Critical Accounting Policies

In the preparation of consolidated financial statements prepared in conformity with U.S.

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We enter into various equipment sale transactions with certain customers, whereby customers purchase equipment from us and then lease the equipment to a third party.

In some cases, we provide a guarantee to repurchase the equipment back at the end of the lease term between the customer and third party lessee at a set residual amount set forth in the initial sales contract or pay the customer for the deficiency, if any, between the sale proceeds received for the equipment and the guaranteed minimum resale value.

We are precluded from recognizing a sale of equipment if we guarantee to repurchase the sold equipment back or guarantee the resale value of the equipment to the customer for contracts determined to be operating leases.

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

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

In some cases, we provide a guarantee to repurchase the equipment back at the end of the lease term between the customer and third-party lessee at a set residual amount set forth in the initial sales contract or pay the

customer for the deficiency, if any, between the sale proceeds received for the equipment and the guaranteed minimum resale value.

We are precluded from recognizing a sale of equipment if we guarantee to repurchase the sold equipment back or guarantee the resale value of the equipment.

Rather, these transactions are accounted for in accordance with ASC 84 0 , Lease s (“ ASC 84 0 ”) in 2020 and ASC 84 2 , Lease s (“ ASC 84 2 ”) in 2021 .

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

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

We also enter into various rental agreements whereby owned equipment is rented to customers.

Revenue from the majority of rental agreements is recognized over the term of the agreement in accordance with Topic 840.

Revenue from the majority of rental agreements is recognized over the term of the agreement in accordance with ASC 840 in 2020 and ASC 842 in 2021.

A rental contract includes rates for daily, weekly or monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding.

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Revenue from guaranteed maintenance contracts is recognized over the contract period in proportion to the costs expected to be incurred in performing services under the contract, typically three to five years.

We also enter into contracts with customers where we provide automated equipment installation and system integration services.

Revenue from the installation services are recognized over time as the performance obligation is satisfied, determined using the cost-to-cost input method, based on contract costs incurred to date to total estimated contract costs.

We also enter into contracts with customers where we provide automated equipment installation and system integration services, or project-based revenues.

These project-based revenues are recognized over time as the performance obligation is satisfied, determined using the cost-to-cost input method, based on contract costs incurred to date to total estimated contract costs.

Payment terms vary by the type and location of the customer and the products or services offered.

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The principal methods of depreciation used are straight-line basis over the estimated useful lives or percentage of rental revenue based on the unit of activity method.

periodically review the assumptions used in calculating rates of depreciation.

We may be required to change these estimates based on changes in our industry or other changes in circumstances.

We periodically review the assumptions used in calculating rates of depreciation.

We may be required to change these estimates based on changes in our industry or changes in other circumstances.

If these estimates change in the future, we may be required to recognize increased or decreased depreciation expense for these assets.

The amount of depreciation expense we record is highly dependent upon the estimated useful lives assigned to each category of equipment.

The useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively, if appropriate.

The amount of depreciation expense we record is highly dependent upon the estimated useful lives assigned to each category of equipment and the utilization of equipment where the unit of activity method is applied.

Generally, we assign the following useful lives to the below categories of Property and Equipment:

Transportation equipment

Machinery and equipment

Transportation equipment (autos and trucks)

Machinery and equipment including rental fleet

Office equipment

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Leasehold improvements

The useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively, if appropriate.

Evaluation of Useful Lives of Intangible Assets

During the 4 th quarter of 2021, the Company reassessed the useful lives of our intangible assets acquired from recent acquisitions.

Given our recent rebranding efforts, the Company shortened the remaining useful lives of some tradename intangible assets resulting in accelerated amortization in the 4 th quarter of 2021 and beyond.

Evaluation of Goodwill Impairment

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Financial Accounting Standards Board (“FASB”) guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.

In connection with our goodwill impairment tests that were conducted as of December 31, 2020 and 2019, we bypassed the qualitative assessment for each reporting unit and proceeded directly to the first step of the goodwill impairment test.

We estimated the fair values of our reporting units based on financial information of companies that we deemed were comparable to our business.

We made judgments the comparability of publicly traded companies engaged in similar businesses and based our judgments on factors such as size, growth rates, profitability, business model and risk.

Our annual goodwill impairment testing conducted as of September 30, 2020, indicated that all of our reporting units had estimated fair values which exceeded their respective carrying amounts.

Our goodwill impairment testing as of December 31, 2019, indicated that all of our reporting units had estimated fair values which exceeded their respective carrying amounts.

Share Based Compensation

The board of directors approved the Company’s 2020 Omnibus Incentive Plan, which enables the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, other share based awards and cash awards to directors, employees and consultants to improve the ability of the Company to attract, retain, and motivate individuals upon whom the Company’s sustained growth and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest in the Company.

We measure the employee stock-based awards at their grant-date fair value using provisions of ASC 718 – Stock Compensation and record compensation expense over the vesting period of the award.

The Company made an accounting election upon adoption of ASU 2016-09 and will recognize forfeitures when occurred rather than estimating expected forfeitures.

The Company treated equity awards granted to non-employee directors similarly to the equity awards to employees upon adoption of ASU 2018-07.

While the Company does not believe a qualitative assessment would have triggered the required quantitative assessment, quantitative assessments were performed at September 30, 2021 and September 30, 2020, nonetheless.

As such, we estimated the fair values of our reporting units based on financial information of companies that we deemed were comparable to our business.

We made judgments regarding the comparability of publicly traded companies engaged in similar businesses and based our judgments on factors such as size, growth rates, profitability, business model and risk.

Our annual goodwill impairment testing conducted as of September 30, 2021 and September 30, 2020 indicated that all of our reporting units had estimated fair values which exceeded their respective carrying amounts.

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts.

These allowances reflect our estimate of the amount of our receivables that we will be unable to collect based on historical write-off experience, current conditions and reasonable assumptions with specific customers that we believe affect collectability.

Our estimate could require change based on changing circumstances, including changes in the economy or in the credit conditions of individual customers.

Accordingly, we may be required to increase or decrease our allowances.

Write-offs of such receivables require management approval based on specified dollar thresholds.

Off Balance Sheet Transactions

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 December 31, 2020, there was $1.4 million in outstanding letters of credits issued in the normal course of business.

As of December 31, 2021, and December 31, 2020 respectively, there was $3.4 million and $1.4 million in outstanding letters of credit 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 $2.4 million and $3.3 million at December 31, 2020 and 2019, respectively.

The estimated exposure related to these guarantees was $1.7 million and $2.4 million at December 31, 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 December 31, 2020 and 2019, respectively.

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

Quantitative and Qualitative Disclosures About Market Risk.

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An index of those financial statements is found in Item 15.

Changes in and Disagreements w ith Accountants on Accounting and Financial Disclosure.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 7. Management’s Discussion and Analysis