UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ALTA EQUIPMENT GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware |
001-38864 |
83-2583782 |
(State or other jurisdiction |
(Commission |
(IRS Employer |
13211 Merriman Road, Livonia, Michigan 48150
(Address of principal executive offices)
(248) 449-6700
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
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Accelerated filer |
☒ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common stock, $0.0001 par value per share |
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ALTG |
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The New York Stock Exchange |
Depositary Shares representing a 1/1000th fractional interest in a share of 10% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value per share |
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ALTG PRA |
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The New York Stock Exchange |
As of August 5, 2022, there were 31,981,843 shares of Common Stock, $0.0001 par value, and 1,200 shares of Preferred Stock, $0.0001 par value, which Preferred Stock is evidenced by 1,200,000 depositary shares, outstanding.
INDEX
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Page |
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PART I – FINANCIAL INFORMATION |
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Item 1. |
Condensed Consolidated Interim Financial Statements (Unaudited) |
3 |
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3 |
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Condensed Consolidated Statements of Income (Loss) (Unaudited) |
4 |
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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) |
5 |
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6 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
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Note 1. |
7 |
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Note 2. |
7 |
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Note 3. |
8 |
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Note 4. |
10 |
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Note 5. |
11 |
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Note 6. |
11 |
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Note 7. |
12 |
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Note 8. |
12 |
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Note 9. |
12 |
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Note 10. |
13 |
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Note 11. |
14 |
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Note 12. |
16 |
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Note 13. |
16 |
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Note 14. |
17 |
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Note 15. |
18 |
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Note 16. |
19 |
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Note 17. |
20 |
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Note 18. |
20 |
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Note 19. |
22 |
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Note 20. |
22 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
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Item 3. |
37 |
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Item 4. |
37 |
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PART II |
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Item 1. |
39 |
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Item 1A. |
39 |
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Item 2. |
39 |
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Item 3. |
39 |
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Item 4. |
39 |
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Item 5. |
39 |
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Item 6. |
39 |
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42 |
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1
Forward-Looking Statements
This Form 10-Q contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of federal securities laws, and are based on our current expectations and assumptions. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements are not intended to guarantee future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:
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, 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.
2
PART I
Item 1. Financial Statements
ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
|
Three Months Ended |
|
|
Six Months Ended |
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(in millions, except share and per share amounts) |
2022 |
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2021 |
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2022 |
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2021 |
|
||||
Revenues: |
|
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New and used equipment sales |
$ |
217.3 |
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$ |
132.0 |
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$ |
368.9 |
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$ |
255.8 |
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Parts sales |
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58.3 |
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44.1 |
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111.7 |
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85.5 |
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Service revenue |
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51.7 |
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42.4 |
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99.9 |
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81.1 |
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Rental revenue |
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43.6 |
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38.2 |
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81.3 |
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71.3 |
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Rental equipment sales |
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35.6 |
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36.0 |
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76.4 |
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67.8 |
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Total revenues |
$ |
406.5 |
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$ |
292.7 |
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$ |
738.2 |
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$ |
561.5 |
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Cost of revenues: |
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New and used equipment sales |
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182.2 |
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112.5 |
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306.1 |
|
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219.0 |
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Parts sales |
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40.0 |
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30.6 |
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76.7 |
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59.3 |
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Service revenue |
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21.9 |
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16.4 |
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42.0 |
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30.9 |
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Rental revenue |
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5.4 |
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5.2 |
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10.8 |
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10.7 |
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Rental depreciation |
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23.3 |
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21.3 |
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43.6 |
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40.7 |
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Rental equipment sales |
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27.9 |
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29.8 |
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61.8 |
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56.7 |
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Cost of revenues |
$ |
300.7 |
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$ |
215.8 |
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$ |
541.0 |
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$ |
417.3 |
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Gross profit |
$ |
105.8 |
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$ |
76.9 |
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$ |
197.2 |
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$ |
144.2 |
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General and administrative expenses |
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88.8 |
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71.1 |
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171.7 |
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135.9 |
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Depreciation and amortization expense |
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4.0 |
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2.6 |
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7.9 |
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4.6 |
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Total general and administrative expenses |
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92.8 |
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73.7 |
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179.6 |
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140.5 |
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Income from operations |
$ |
13.0 |
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$ |
3.2 |
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$ |
17.6 |
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$ |
3.7 |
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Other (expense) income: |
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Interest expense, floor plan payable – new equipment |
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(0.5 |
) |
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(0.5 |
) |
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(0.8 |
) |
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(1.0 |
) |
Interest expense – other |
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(6.3 |
) |
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(5.5 |
) |
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(12.1 |
) |
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(10.8 |
) |
Other income |
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0.4 |
|
|
|
— |
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0.7 |
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0.1 |
|
Loss on extinguishment of debt |
|
— |
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(11.9 |
) |
|
|
— |
|
|
|
(11.9 |
) |
Total other expense |
$ |
(6.4 |
) |
|
$ |
(17.9 |
) |
|
$ |
(12.2 |
) |
|
$ |
(23.6 |
) |
Income (loss) before taxes |
$ |
6.6 |
|
|
$ |
(14.7 |
) |
|
$ |
5.4 |
|
|
$ |
(19.9 |
) |
Income tax provision |
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
0.5 |
|
Net income (loss) |
$ |
6.1 |
|
|
$ |
(14.7 |
) |
|
$ |
4.9 |
|
|
$ |
(20.4 |
) |
Preferred stock dividends |
|
(0.7 |
) |
|
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(1.1 |
) |
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(1.5 |
) |
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(1.1 |
) |
Net income (loss) available to common shareholders |
$ |
5.4 |
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|
$ |
(15.8 |
) |
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$ |
3.4 |
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|
$ |
(21.5 |
) |
Basic income (loss) per share |
$ |
0.17 |
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|
$ |
(0.49 |
) |
|
$ |
0.11 |
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|
$ |
(0.69 |
) |
Diluted income (loss) per share |
$ |
0.17 |
|
|
$ |
(0.49 |
) |
|
$ |
0.11 |
|
|
$ |
(0.69 |
) |
Basic weighted average common shares outstanding |
|
31,933,032 |
|
|
|
32,403,151 |
|
|
|
32,147,015 |
|
|
|
31,204,239 |
|
Diluted weighted average common shares outstanding |
|
32,151,512 |
|
|
|
32,553,526 |
|
|
|
32,367,810 |
|
|
|
31,344,518 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
Three and Six Months Ended June 30, 2022 |
|
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Preferred Stock |
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Common Stock |
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(amounts in millions, except share amounts) |
|
Number |
|
|
Amount |
|
|
Number of |
|
|
Amount |
|
|
Additional |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Total |
|
||||||||
Balance at December 31, 2021 |
|
|
1,200,000 |
|
|
$ |
— |
|
|
|
32,363,376 |
|
|
$ |
— |
|
|
$ |
217.4 |
|
|
$ |
(76.8 |
) |
|
$ |
(5.9 |
) |
|
$ |
134.7 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
(1.2 |
) |
Dividends on preferred stock, $0.625 per share |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.8 |
) |
|
|
— |
|
|
|
(0.8 |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
Balance at March 31, 2022 |
|
|
1,200,000 |
|
|
$ |
— |
|
|
|
32,363,376 |
|
|
$ |
— |
|
|
$ |
217.7 |
|
|
$ |
(78.8 |
) |
|
$ |
(5.9 |
) |
|
$ |
133.0 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6.1 |
|
|
|
— |
|
|
|
6.1 |
|
Dividends on preferred stock, $0.625 per share |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.7 |
) |
|
|
— |
|
|
|
(0.7 |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
90,649 |
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|
|
— |
|
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|
0.8 |
|
|
|
— |
|
|
|
— |
|
|
|
0.8 |
|
Repurchase of common stock (1) |
|
|
— |
|
|
|
— |
|
|
|
(472,182 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at June 30, 2022 |
|
|
1,200,000 |
|
|
$ |
— |
|
|
|
31,981,843 |
|
|
$ |
— |
|
|
$ |
218.5 |
|
|
$ |
(73.4 |
) |
|
$ |
(5.9 |
) |
|
$ |
139.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
Three and Six Months Ended June 30, 2021 |
|
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|
|
Preferred Stock |
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
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(amounts in millions, except share amounts) |
|
Number |
|
|
Amount |
|
|
Number of |
|
|
Amount |
|
|
Additional |
|
|
Accumulated |
|
|
Treasury Stock |
|
|
Total |
|
||||||||
Balance at December 31, 2020 |
|
|
1,200,000 |
|
|
$ |
— |
|
|
|
30,018,502 |
|
|
$ |
— |
|
|
$ |
216.2 |
|
|
$ |
(53.4 |
) |
|
$ |
(5.9 |
) |
|
$ |
156.9 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5.7 |
) |
|
|
— |
|
|
|
(5.7 |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
Balance at March 31, 2021 |
|
|
1,200,000 |
|
|
$ |
— |
|
|
|
30,018,502 |
|
|
$ |
— |
|
|
$ |
216.5 |
|
|
$ |
(59.1 |
) |
|
$ |
(5.9 |
) |
|
$ |
151.5 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(14.7 |
) |
|
|
— |
|
|
|
(14.7 |
) |
Dividends on preferred stock, $0.890 per share |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.1 |
) |
|
|
— |
|
|
|
(1.1 |
) |
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
Warrants exchanged into common stock |
|
|
— |
|
|
|
— |
|
|
|
2,279,874 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of restricted stock units to employees |
|
|
— |
|
|
|
— |
|
|
|
65,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at June 30, 2021 |
|
|
1,200,000 |
|
|
$ |
— |
|
|
|
32,363,376 |
|
|
$ |
— |
|
|
$ |
216.7 |
|
|
$ |
(74.9 |
) |
|
$ |
(5.9 |
) |
|
$ |
135.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(1) Correction of previously disclosed shares repurchased in 2020, not previously reported as a reduction of common stock shares outstanding. Amount is immaterial to the condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months Ended June 30, |
|
|||||
(amounts in millions) |
|
2022 |
|
|
2021 |
|
||
OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
4.9 |
|
|
$ |
(20.4 |
) |
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
51.5 |
|
|
|
45.3 |
|
Amortization of debt discount and debt issuance costs |
|
|
0.7 |
|
|
|
0.8 |
|
Imputed interest |
|
|
0.1 |
|
|
|
0.2 |
|
Gain on sale of property and equipment |
|
|
(0.1 |
) |
|
|
— |
|
Gain on sale of rental equipment |
|
|
(14.6 |
) |
|
|
(11.1 |
) |
Provision for inventory obsolescence |
|
|
1.9 |
|
|
|
0.4 |
|
Provision for bad debt |
|
|
2.4 |
|
|
|
2.3 |
|
Loss on debt extinguishment |
|
|
— |
|
|
|
11.9 |
|
Share-based compensation expense |
|
|
1.1 |
|
|
|
0.5 |
|
Changes in deferred income taxes |
|
|
— |
|
|
|
0.5 |
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
(30.7 |
) |
|
|
(18.6 |
) |
Inventories |
|
|
(131.7 |
) |
|
|
(85.6 |
) |
Proceeds from sale of rental equipment |
|
|
76.4 |
|
|
|
67.8 |
|
Prepaid expenses and other assets |
|
|
(7.3 |
) |
|
|
(8.2 |
) |
Manufacturers floor plans payable |
|
|
31.7 |
|
|
|
6.0 |
|
Accounts payable, accrued expenses, customer deposits, and other current liabilities |
|
|
16.7 |
|
|
|
19.2 |
|
Leases, deferred revenue, and other liabilities |
|
|
0.4 |
|
|
|
(0.8 |
) |
Net cash provided by operating activities |
|
$ |
3.4 |
|
|
$ |
10.2 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Expenditures for rental equipment |
|
$ |
(30.3 |
) |
|
$ |
(22.8 |
) |
Expenditures for property and equipment |
|
|
(4.2 |
) |
|
|
(3.3 |
) |
Proceeds from sale of property and equipment |
|
|
0.3 |
|
|
|
1.1 |
|
Expenditures for guaranteed purchase obligations |
|
|
(1.7 |
) |
|
|
(1.2 |
) |
Expenditures for acquisitions, net of cash acquired |
|
|
(1.5 |
) |
|
|
(2.6 |
) |
Net cash used in investing activities |
|
$ |
(37.4 |
) |
|
$ |
(28.8 |
) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Expenditures for debt issuance costs |
|
$ |
— |
|
|
$ |
(1.6 |
) |
Extinguishment of long-term debt |
|
|
— |
|
|
|
(153.1 |
) |
Proceeds from lines of credit and long-term borrowings |
|
|
166.7 |
|
|
|
488.3 |
|
Principal payments on lines of credit, long-term debt and finance lease obligations |
|
|
(143.4 |
) |
|
|
(306.9 |
) |
Proceeds from floor plan payable with unaffiliated source |
|
|
64.6 |
|
|
|
52.3 |
|
Payments on floor plan payable with unaffiliated source |
|
|
(52.5 |
) |
|
|
(57.7 |
) |
Preferred dividends paid |
|
|
(1.5 |
) |
|
|
(1.1 |
) |
Payment of promissory note |
|
|
— |
|
|
|
(1.0 |
) |
Other financing activities |
|
|
(1.7 |
) |
|
|
— |
|
Net cash provided by financing activities |
|
$ |
32.2 |
|
|
$ |
19.2 |
|
|
|
|
|
|
|
|
||
NET CHANGE IN CASH |
|
|
(1.8 |
) |
|
|
0.6 |
|
|
|
|
|
|
|
|
||
Cash, Beginning of year |
|
|
2.3 |
|
|
|
1.2 |
|
Cash, End of period |
|
$ |
0.5 |
|
|
$ |
1.8 |
|
Supplemental schedule of noncash investing and financing activities: |
|
|
|
|
|
|
||
Noncash asset purchases: |
|
|
|
|
|
|
||
Net transfer of assets from inventory to rental fleet within property and equipment |
|
$ |
69.9 |
|
|
$ |
86.3 |
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
11.9 |
|
|
$ |
8.3 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
NOTE 1 — ORGANIZATION AND NATURE OF OPERATIONS
Nature of Operations
Alta Equipment Group Inc. and its subsidiaries (“Alta” or the “Company”) is engaged in the sale, service, and rental of material handling and construction equipment in the states of Michigan, Illinois, Indiana, Ohio, New York (including New York City in our Material Handling segment), Virginia, Massachusetts (including Boston), Maine, New Hampshire, Connecticut, and Florida.
Unless the context otherwise requires, the use of the terms “the Company”, “we,” “us,” and “our” in these notes to the unaudited condensed consolidated financial statements refers to Alta Equipment Group Inc. and its consolidated subsidiaries.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements include the consolidated accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions and balances have been eliminated in the preparation of the condensed consolidated financial statements.
Reclassification and correction
Certain amounts in the prior year Condensed Consolidated Statement of Cash Flows have been reclassified to conform with the presentation in the current year. For the six months ended June 30, 2021, the Company corrected the cash flow presentation of expenditures of $1.2 million for guaranteed purchase obligations to present this activity as a cash outflow for investing activities, which was previously presented within operating activities. The presentation for the six months ended June 30, 2021 has been revised to align with current period presentation. The Company has concluded the change is not material.
The unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. Operating results for the six months ended June 30, 2022 is not necessarily indicative of the results that may be expected for the year ending December 31, 2022, and therefore, the results and trends in these unaudited interim condensed consolidated financial statements may not be the same for the entire year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
We describe our significant accounting policies in Note 2 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021. During the three and six months ended June 30, 2022, there were no significant changes to those accounting policies.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are based on assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.
New Accounting Pronouncements
Pronouncements Not Yet Adopted
Financial Instruments — Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard prescribes an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the timely recognition of losses. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of the financial instrument.
Measurement of expected credit losses is to be based on relevant forecasts that affect collectability. The scope of financial assets within the CECL model is broad and includes trade receivables from certain revenue transactions and certain off-balance sheet credit exposures. Different components of the guidance require modified retrospective or prospective adoption. As amended by ASU 2019-10, the ASU 2016-13 is effective for the annual reporting period beginning January 1, 2023. The Company believes ASU 2016-13 will only be applicable to the Company’s receivables from revenue transactions, or trade receivables, except those arising from rental
7
revenues as ASU 2016-13 does not apply to receivables arising from operating leases. The Company is currently evaluating whether the new guidance, while limited to our non-operating lease trade receivables, will have an impact on the condensed consolidated financial statements or existing internal controls.
NOTE 3 — REVENUE RECOGNITION
We recognize revenue in accordance with two different accounting standards: 1) Topic 606, Revenues from Contracts with Customers ("Topic 606") and 2) Topic 842, Leases, ("Topic 842").
Disaggregation of Revenues
The following table summarizes the Company’s disaggregated revenues as presented in the Condensed Consolidated Statements of Income (Loss) for the three months ended June 30, 2022 and 2021 by revenue type, and by the applicable accounting standard.
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||||||||||||||||||
|
|
Topic 842 |
|
|
Topic 606 |
|
|
Total |
|
|
Topic 842 |
|
|
Topic 606 |
|
|
Total |
|
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
New and used equipment sales |
|
$ |
— |
|
|
$ |
217.3 |
|
|
$ |
217.3 |
|
|
$ |
— |
|
|
$ |
132.0 |
|
|
$ |
132.0 |
|
Parts sales |
|
|
— |
|
|
|
58.3 |
|
|
|
58.3 |
|
|
|
— |
|
|
|
44.1 |
|
|
|
44.1 |
|
Service revenue |
|
|
— |
|
|
|
51.7 |
|
|
|
51.7 |
|
|
|
— |
|
|
|
42.4 |
|
|
|
42.4 |
|
Rental revenue |
|
|
43.6 |
|
|
|
— |
|
|
|
43.6 |
|
|
|
38.2 |
|
|
|
— |
|
|
|
38.2 |
|
Rental equipment sales |
|
|
— |
|
|
|
35.6 |
|
|
|
35.6 |
|
|
|
— |
|
|
|
36.0 |
|
|
|
36.0 |
|
Total revenues |
|
$ |
43.6 |
|
|
$ |
362.9 |
|
|
$ |
406.5 |
|
|
$ |
38.2 |
|
|
$ |
254.5 |
|
|
$ |
292.7 |
|
The following table summarizes the Company’s disaggregated revenues as presented in the Condensed Consolidated Statements of Income (Loss) for the six months ended June 30, 2022 and 2021 by revenue type, and by the applicable accounting standard.
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
Topic 842 |
|
|
Topic 606 |
|
|
Total |
|
|
Topic 842 |
|
|
Topic 606 |
|
|
Total |
|
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
New and used equipment sales |
|
$ |
— |
|
|
$ |
368.9 |
|
|
$ |
368.9 |
|
|
$ |
— |
|
|
$ |
255.8 |
|
|
$ |
255.8 |
|
Parts sales |
|
|
— |
|
|
|
111.7 |
|
|
|
111.7 |
|
|
|
— |
|
|
|
85.5 |
|
|
|
85.5 |
|
Service revenue |
|
|
— |
|
|
|
99.9 |
|
|
|
99.9 |
|
|
|
— |
|
|
|
81.1 |
|
|
|
81.1 |
|
Rental revenue |
|
|
81.3 |
|
|
|
— |
|
|
|
81.3 |
|
|
|
71.3 |
|
|
|
— |
|
|
|
71.3 |
|
Rental equipment sales |
|
|
— |
|
|
|
76.4 |
|
|
|
76.4 |
|
|
|
— |
|
|
|
67.8 |
|
|
|
67.8 |
|
Total revenues |
|
$ |
81.3 |
|
|
$ |
656.9 |
|
|
$ |
738.2 |
|
|
$ |
71.3 |
|
|
$ |
490.2 |
|
|
$ |
561.5 |
|
The Company believes that the disaggregation of revenues from contracts to customers as summarized above, together with the discussion below, depicts how the nature, amount, timing and uncertainty of its revenues and cash flows are affected by economic factors.
Leases revenues (Topic 842)
New and used equipment sales: The Company enters into various equipment sale transactions with certain customers, whereby customers purchase equipment from the Company and then lease the equipment to a third party. In some cases, the Company provides 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. The Company is precluded from recognizing a sale of equipment when it is obligated or has an option to repurchase or guarantees the resale value of the equipment to the customer for contracts determined to be operating leases. For these arrangements, because the Company generally receives the full amount of the consideration at the beginning of the arrangement, the Company initially records deferred revenue for the amount received and recognizes revenue on a pro-rata basis over the term of the contract under Topic 842.
The 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 lease contract period up to the first exercise date of the guarantee. At June 30, 2022 and December 31, 2021, the total deferred revenue relating to these various equipment sale transactions amounted to $2.3 million and $2.9 million, respectively. The Company also recognized a liability for its guarantee to repurchase equipment at residual amounts of $6.6 million and $7.2 million as of June 30, 2022 and December 31, 2021, respectively.
8
Rental revenue: Owned equipment rentals represent revenues from renting equipment. The Company accounts for these rental contracts as operating leases. The Company recognizes revenue from equipment rentals in the period earned, regardless of the timing of billing to customers. 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. Because the rental contracts can extend across multiple reporting periods, the Company records unbilled rental revenues and deferred rental revenues at the end of each reporting period. Unbilled rental revenues are included as a component of “Accounts receivable” on the Condensed Consolidated Balance Sheets. Rental equipment is also purchased outright (“rental conversions”). Rental revenue and revenue attributable to rental conversions, are recognized in “Rental revenue” and “Rental equipment sales” on the Condensed Consolidated Statements of Income (Loss), respectively.
Revenues from contracts with customers (Topic 606)
Accounting for the different types of revenues pursuant to Topic 606 are discussed below. Substantially all of the Company’s revenues under Topic 606 are recognized at a point in time rather than over time.
New and used equipment sales: With the exception of bill-and-hold arrangements and project-based revenues, the Company’s revenues from the sale of new and used equipment are recognized at the time of delivery to, or pick-up by, the customer, which is when the customer obtains control of the promised good. Under bill-and-hold arrangements, revenue is recognized when all configuration work is complete and the equipment has been set aside for final shipment, at which point the Company has determined control has been transferred. The bill-and-hold arrangements primarily apply to sales when physical shipment of heavy equipment to the customer is prohibited by law (e.g. frost laws) or requested by the customer due to their inability to arrange freight simultaneous to the satisfaction of the performance obligations, both are limited circumstances. The customer equipment sold under a bill-and-hold arrangement is physically separated from Company inventory and that equipment cannot be used by the Company or sold to another customer. The Company does not offer material rights of return.
Project-based revenues, as referred to herein, are contracts with customers where the Company provides design and build solutions, automated equipment installation and system integration and software services. This revenue is recognized as the performance obligations are satisfied over time using the cost-to-cost input method, based on contract costs incurred to date to total estimated contract costs. The Company recognized approximately $39.1 million and $21.4 million in project-based revenues for the six months ended June 30, 2022 and 2021, respectively, and approximately $22.4 million and $13.5 million in revenues for the three months ended June 30, 2022 and 2021, respectively.
Parts sales: Revenues from the sale of parts are recognized at the time of pick-up by the customer for over-the-counter sales transactions. For parts that are shipped to a customer, the Company elected to use a practical expedient of Topic 606 and treat such shipping activities as fulfillment costs, thereby recognizing revenues at the time of shipment. The Company does not offer material rights of return.
Service revenue: The Company records service revenue primarily from guaranteed maintenance and periodic maintenance contracts with customers. The Company recognizes periodic maintenance service revenues at the time such services are completed, which is when the control of the promised services is transferred over to the customer. The Company recognizes guaranteed maintenance service revenues over-time using an input method of costs incurred to estimated costs over the life of the related contract. Revenue recognized from guaranteed maintenance contracts totaled $10.6 million and $8.9 million for the six months ended June 30, 2022 and 2021, respectively, and $5.3 million and $4.6 million for the three months ended June 30, 2022 and 2021, respectively. The Company also records service revenue from warranty contracts whereby the Company performs service on behalf of an Original Equipment Manufacturer (“OEM”) or third-party warranty provider. The Company recognizes warranty revenues at the time such services are completed.
Rental equipment sales: The Company also sells rental equipment from our rental fleet. These sales are recognized at the time of delivery to, or pick-up by, the customer, which is when the customer obtains control of the promised good. In some cases, certain rental agreements contain a rental purchase option, whereby the customer has an option to purchase the rented equipment during the term of the rental agreement. Revenues from the sale of rental equipment are recognized at the time the rental purchase option agreement has been approved and signed by both parties, as the equipment is already in the customer’s possession under the previous rental agreement, and therefore control has been transferred as title has been transferred.
Contract costs
The Company does not recognize assets associated with the incremental costs of obtaining a contract with a customer that the Company expects to recover (for example, a sales commission). Most of the Company’s revenue is recognized at a point in time or over a period of one year or less, and the Company has used the practical expedient that allows it to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have
9
recognized is one year or less. The amount of the costs associated with the revenue recognized over a period of greater than one year is insignificant.
Receivables and contract assets and liabilities
The Company has contract assets and contract liabilities associated with project-based contracts with customers.
Contract assets are fulfilled contractual obligations prior to receivables being recognizable for project-based revenue. Contract assets as of June 30, 2022 and December 31, 2021 were $5.5 million and $6.0 million, respectively.
Revenue from recurring support services is recognized ratably over the contract period. The Company also recognizes deferred revenue related to rental agreements. The deferred revenue (contract liabilities) includes the unearned portion of project-based revenue. Total deferred revenue relating to project-based revenues, service sales agreements, and rental agreements as of June 30, 2022 and December 31, 2021 was $22.3 million and $16.5 million, respectively. In addition, deferred revenue includes the unearned portion of revenue related to guaranteed maintenance service contracts for customers covering equipment previously purchased. These amounts are recognized based on an estimated rate at which the services are provided over the life of the contract. Deferred revenue also includes the net proceeds upon sale of equipment with certain guaranteed purchase obligations. In total, deferred revenue as of June 30, 2022 and December 31, 2021 was $24.6 million and $19.4 million, respectively. For the three and six months ended June 30, 2022, the Company recognized revenue of $8.2 million and $10.5 million, respectively, from the prior year ending deferred revenue balance. For the three and six months ended June 30, 2021, the Company recognized revenue of $2.2 million and $5.6 million, respectively, from the December 31, 2020 deferred revenue balance.
Consideration and payment terms
The Company’s revenues do not include material amounts of variable consideration under Topic 606. Payment terms may vary by the type of customer, location, and the type of products or services offered. The time between invoicing and when payment is due is not significant, and contracts do not generally include a significant financing component. Contracts with customers do not generally result in significant obligations associated with returns, refunds, or warranties.
Contract estimates and judgments
The Company’s revenues accounted for under Topic 606 generally do not require significant estimates or judgments as the transaction price is generally fixed and clearly stated in the customer contracts. Contracts generally do not include multiple performance obligations, and accordingly do not require estimates of the standalone selling price for each performance obligation. Substantially all of the Company’s revenues are recognized at a point in time and the timing of the satisfaction of the applicable performance obligations is readily determinable. The Company’s revenues under Topic 606 are generally recognized at the time of delivery to, or pick-up by, the customer.
The Company leases a subset of its operating facilities from three real estate entities related through common ownership. Total rent expense under these lease agreements, all of which are classified as operating, was $2.4 million for both the six months ended June 30, 2022 and 2021, and $1.2 million for both the three months ended June 30, 2022 and 2021, respectively. At June 30, 2022, the Company had net operating right-of-use assets and operating lease liabilities associated with related party leases of $22.3 million and $24.7 million, respectively. At December 31, 2021 the Company had net operating right-of-use assets and operating lease liabilities associated with related party leases of $24.0 million and $26.3 million, respectively. See Note 11, Leases, for a schedule of future minimum lease payments under operating leases with both related parties and unrelated third parties.
Ryan Greenawalt, Tony Colucci, and Craig Brubaker collectively own an indirect, non-controlling minority interest in OneH2, Inc. (“OneH2”), which they each acquired through various transactions that took place in early 2018 and prior. Ryan Greenawalt is on the Board of Directors of OneH2. OneH2 is a privately held company that produces and delivers hydrogen fuel to end users. The Company did not make any purchases from OneH2 in 2021. During the first six months of 2022, the Company purchased approximately $45,000 of hydrogen fuel from OneH2 and has a vendor deposit of approximately $0.2 million as of June 30, 2022.
10
NOTE 5 — INVENTORIES
The components of inventories, net, consisted of the following (amounts in millions):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
New equipment |
|
$ |
184.7 |
|
|
$ |
146.0 |
|
Used equipment |
|
|
46.5 |
|
|
|
34.3 |
|
Work in process |
|
|
8.2 |
|
|
|
6.7 |
|
Parts |
|
|
62.6 |
|
|
|
55.7 |
|
Gross inventory |
|
$ |
302.0 |
|
|
$ |
242.7 |
|
Inventory reserves |
|
|
(5.4 |
) |
|
|
(3.5 |
) |
Inventories, net |
|
$ |
296.6 |
|
|
$ |
239.2 |
|
Direct labor of $1.7 million and $1.6 million incurred for open service orders were capitalized and included in work in process at June 30, 2022 and December 31, 2021, respectively. The remaining work in process balances as of June 30, 2022 and December 31, 2021 primarily represent parts applied to open service orders. Rental depreciation expense in connection with our new and used equipment was $1.7 million and $1.0 million for the three months ended June 30, 2022 and 2021, respectively, and $3.1 million and $3.2 million for the six months ended June 30, 2022 and 2021, respectively.
NOTE 6 — PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following (amounts in millions):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Land |
|
$ |
2.1 |
|
|
$ |
2.1 |
|
Rental fleet |
|
|
474.1 |
|
|
|
461.4 |
|
Equipment and leasehold improvements: |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
8.4 |
|
|
|
7.2 |
|
Autos and trucks |
|
|
6.9 |
|
|
|
6.6 |
|
Leasehold improvements |
|
|
12.2 |
|
|
|
10.6 |
|
Finance lease right-of-use assets |
|
|
18.7 |
|
|
|
15.1 |
|
Office equipment |
|
|
3.7 |
|
|
|
3.5 |
|
Computer equipment |
|
|
11.8 |
|
|
|
11.1 |
|
Total cost |
|
$ |
537.9 |
|
|
$ |
517.6 |
|
|
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
|
|
|
|
||
Rental fleet |
|
$ |
(164.7 |
) |
|
$ |
(149.8 |
) |
Equipment, autos and trucks, leasehold improvements, finance leases and office and computer equipment |
|
|
(26.5 |
) |
|
|
(23.3 |
) |
Total accumulated depreciation and amortization |
|
$ |
(191.2 |
) |
|
$ |
(173.1 |
) |
Property and equipment, net |
|
$ |
346.7 |
|
|
$ |
344.5 |
|
Total depreciation and amortization on property and equipment was $24.0 million and $21.8 million for the three months ended June 30, 2022 and 2021, respectively, and $45.4 million and $40.3 million for the six months ended June 30, 2022 and 2021, respectively. The Company had assets related to finance leases with gross carrying values totaling $18.7 million and $15.1 million, and accumulated amortization balances totaling $4.1 million and $3.8 million, as of June 30, 2022 and December 31, 2021, respectively. Of the $474.1 million and $461.4 million of gross cost of rental fleet, $9.9 million and $9.7 million were represented by guaranteed purchase obligation assets as of June 30, 2022 and December 31, 2021, respectively.
The Company evaluates long-lived assets, such as property and equipment and intangible assets subject to amortization, for impairment if events or changes in circumstances indicate that the carrying value of any asset group may not be recoverable. After evaluating and weighing all relevant events and circumstances, the Company did not identify indicators requiring the performance of an interim impairment test for the long-lived assets as of and for the period ended June 30, 2022.
11
NOTE 7 — GOODWILL
The following table summarizes the changes in the carrying amount of goodwill in total and by reportable segment during the periods ended June 30, 2022 and December 31, 2021 (amounts in millions):
|
|
Material |
|
|
Construction |
|
|
Total |
|
|||
Balance, Year Ended December 31, 2020 |
|
$ |
10.2 |
|
|
$ |
14.1 |
|
|
$ |
24.3 |
|
Additions |
|
|
1.4 |
|
|
|
17.6 |
|
|
|
19.0 |
|
Adjustments to purchase price allocations |
|
|
— |
|
|
|
(1.4 |
) |
|
|
(1.4 |
) |
Balance, December 31, 2021 |
|
$ |
11.6 |
|
|
$ |
30.3 |
|
|
$ |
41.9 |
|
Additions |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
Adjustments to purchase price allocations |
|
|
— |
|
|
|
2.1 |
|
|
|
2.1 |
|
Balance, June 30, 2022 |
|
$ |
11.7 |
|
|
$ |
32.4 |
|
|
$ |
44.1 |
|
The Company evaluates goodwill for impairment at least annually, or more frequently if triggering events occur or other impairment indicators arise which might impair recoverability. After evaluating and weighing all relevant events and circumstances, the Company concluded there was no triggering event that constitutes the need to perform a goodwill impairment test for the period ended June 30, 2022.
See Note 17, Business Combinations, for further information.
NOTE 8 — OTHER INTANGIBLE ASSETS
The gross carrying amount of other intangible assets and accumulated amortization as of June 30, 2022 and December 31, 2021 were as follows (amounts in millions):
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Weighted Average Remaining Life (in years) |
|
|
Gross carrying |
|
|
Accumulated |
|
|
Net carrying |
|
||||
Customer relationships |
|
|
8.5 |
|
|
$ |
44.8 |
|
|
$ |
(8.1 |
) |
|
$ |
36.7 |
|
Tradenames |
|
|
4.0 |
|
|
|
4.5 |
|
|
|
(1.5 |
) |
|
|
3.0 |
|
Non-compete agreements |
|
|
2.8 |
|
|
|
0.7 |
|
|
|
(0.3 |
) |
|
|
0.4 |
|
Internal use software |
|
|
2.7 |
|
|
|
0.5 |
|
|
|
(0.2 |
) |
|
|
0.3 |
|
Total |
|
|
8.1 |
|
|
$ |
50.5 |
|
|
$ |
(10.1 |
) |
|
$ |
40.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Weighted Average Remaining Life (in years) |
|
|
Gross carrying |
|
|
Accumulated |
|
|
Net carrying |
|
||||
Customer relationships |
|
|
9.0 |
|
|
$ |
44.8 |
|
|
$ |
(5.9 |
) |
|
$ |
38.9 |
|
Tradenames |
|
|
4.3 |
|
|
|
4.5 |
|
|
|
(0.9 |
) |
|
|
3.6 |
|
Non-compete agreements |
|
|
3.3 |
|
|
|
0.7 |
|
|
|
(0.2 |
) |
|
|
0.5 |
|
Internal use software |
|
|
3.2 |
|
|
|
0.5 |
|
|
|
(0.1 |
) |
|
|
0.4 |
|
Total |
|
|
8.5 |
|
|
$ |
50.5 |
|
|
$ |
(7.1 |
) |
|
$ |
43.4 |
|
Amortization of other intangible assets was $1.6 million and $0.8 million for the three months ended June 30, 2022 and 2021, respectively, and $3.0 million and $1.5 million for the six months ended June 30, 2022 and 2021, respectively.
During the fourth quarter of 2021, the Company reassessed the useful lives of our other intangible assets acquired from recent acquisitions. Given our rebranding efforts, the Company shortened the remaining useful lives of some tradename intangible assets resulting in accelerated amortization prospectively beginning in the fourth quarter of 2021.
NOTE 9 — LINES OF CREDIT AND FLOOR PLANS
Line of Credit and Floor Plan — First Lien Lender
On April 1, 2021, the Company entered into a Sixth Amended and Restated ABL First Lien Credit Agreement (the “Amended and Restated ABL Credit Agreement”) 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, superseding and replacing the Fifth Amended and Restated ABL First Lien Credit Agreement. Under the Amended and
12
Restated ABL Credit Agreement, the Company has an asset based revolving line of credit (the “ABL Facility”) 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 ABL Facility, which is collateralized by substantially all assets of the Company, has a maximum borrowing capacity of $350.0 million and interest cost is the Secured Overnight Financing Rate (“SOFR”) plus an applicable margin on the CB Floating Rate, depending on borrowing levels. As of June 30, 2022, the Company had an outstanding ABL Facility balance of $125.6 million, excluding unamortized debt issuance costs. The effective interest rate was 3.6% at June 30, 2022. As of December 31, 2021, the Company had an outstanding ABL Facility balance of $100.7 million, excluding unamortized debt issuance costs. The effective interest rate was 2.3% at December 31, 2021.
On April 1, 2021, the Company entered into a 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. Under the Floor Plan Credit Agreement, the Company has a first lien floor plan facility (the "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 $50.0 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 June 30, 2022, the Company had an outstanding balance on their First Lien Floor Plan Facility of $42.7 million, excluding unamortized debt issuance costs. The effective interest rate at June 30, 2022 was 3.9%. 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. The effective interest rate at December 31, 2021 was 2.8%. The Company routinely sells equipment that is financed under the First Lien Floor Plan Facility. When this occurs the payable under the First Lien Floor Plan Facility related to the financed equipment being sold becomes due to be paid.
Original Equipment Manufacturer (“OEM”) Captive Lenders and Suppliers’ Floor Plans
The Company has floor plan financing facilities with several OEM captive lenders and suppliers (the “OEM Floor Plan Facilities”, and together with the First Lien Floor Plan Facility, collectively the “Floor Plan Facilities”) for new and used inventory and rental equipment, each with borrowing capacities ranging from $0.1 million to $102.0 million. Primarily, the Company utilizes the OEM Floor Plan Facilities for purchases of new equipment inventories. Certain OEM Floor Plan Facilities provide for up to twelve-months interest only or deferred payment periods. In addition, certain OEM Floor Plan Facilities regularly provide for interest and principal free payment terms. The Company routinely sells equipment that is financed under OEM Floor Plan Facilities. When this occurs the payable under the OEM Floor Plan Facilities related to the financed equipment being sold becomes due to be paid.
With the recent acquisitions, some of the Company’s OEM Floor Plan Facilities were amended to include new locations and new entities. The OEM Floor Plan Facilities are secured by the equipment being financed, and contain certain operating company guarantees. The interest cost is SOFR plus an applicable margin. The effective rates, excluding the favorable effect of interest-subsidies, as of June 30, 2022 ranged from 3.8% to 5.9%. As of June 30, 2022 and December 31, 2021, the Company had an outstanding balance on the OEM Floor Plan Facilities of $156.0 million and $124.3 million, respectively.
The total aggregate amount of financing under the Floor Plan Facilities cannot exceed $350.0 million at any time. The total outstanding balance under the Floor Plan Facilities as of June 30, 2022 and December 31, 2021, was $198.7 million and $154.9 million, respectively, excluding unamortized debt issuance costs. For the six months ended June 30, 2022 and 2021, the Company recognized interest expense associated with new equipment financed under its Floor Plan Facilities of $0.8 million and $1.0 million, respectively, and $0.5 million for both the three months ended June 30, 2022 and 2021.
Maximum borrowings under the Floor Plan Facilities and ABL Facility are limited to $700.0 million unless certain other conditions are met. The total amount outstanding as of June 30, 2022 and December 31, 2021, was $324.3 million and $255.6 million, exclusive of debt issuance and deferred financings costs of $2.1 million and $2.4 million, respectively.
NOTE 10 — LONG-TERM DEBT
Senior Secured Second Lien Notes
On April 1, 2021, the Company completed a private offering of Senior Secured Second Lien Notes (the “Notes”), for the purposes of, among other things, repayment and refinancing of a portion of the Company’s prior existing debt, reducing interest rate exposure and providing liquidity for financing of future growth initiatives. The Company sold $315.0 million of 5.625% Notes which are due in 2026. The Notes are guaranteed (the “Guarantees” and, together with the Notes, the “Securities”) by the guarantors that are party thereto (the “Guarantors”) on a second lien, senior secured basis. 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, and J.P. Morgan Securities LLC, as representative of the initial purchasers.
The Notes are guaranteed by each of our existing and future domestic subsidiaries that become a borrower or guarantor under our or the Guarantors’ indebtedness, including the Credit Agreements, as 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
13
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 and the Floor Plan Facility 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 bear interest at the rate of 5.625% per annum and will mature on April 15, 2026. Interest on the Notes is payable in cash on April 15 and October 15 of each year, beginning on October 15, 2021.
As of June 30, 2022, outstanding borrowings under the Notes were $310.4 million, which included $4.6 million deferred financing costs and original issue discounts. The effective interest rate on the Notes, taking into account the original issue discount, is 5.93%.
Term Loan
On February 14, 2020, the Company entered into a Note Purchase Agreement for a second lien term loan (the “Term Loan”) in an aggregate principal amount of $155.0 million with a second priority lien lender through syndication, with an initial maturity date of August 2025. The term loan was payable, at the lender’s option, in quarterly installments of $1.9 million plus interest cost at SOFR plus 8%. On April 1, 2021, in connection with the issuance of the new Notes, the Company repaid all of its outstanding obligations under the Term Loan, $147.3 million, completely discharging the Company of any further obligations to the lender.
Extinguishment of Debt
In the second quarter of 2021, and in connection with the repayment of the Term Loan, the Company recorded a loss on the extinguishment of debt in the amount of $11.9 million in the line item "Loss on extinguishment of debt" in its Condensed Consolidated Statements of Income (Loss). This was in accordance with Topic 470-50, Debt – Modifications and Extinguishments, as the transaction was determined to be an extinguishment of the existing debt and an issuance of new debt.
The Company’s long-term debt consists of the following (amounts in millions):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
High yield notes |
|
$ |
315.0 |
|
|
$ |
315.0 |
|
Unamortized debt issuance costs |
|
|
(1.0 |
) |
|
|
(1.0 |
) |
Debt discount |
|
|
(3.6 |
) |
|
|
(4.0 |
) |
Finance leases |
|
|
15.0 |
|
|
|
11.6 |
|
Total debt and finance leases |
|
$ |
325.4 |
|
|
$ |
321.6 |
|
Less: current maturities |
|
|
(3.1 |
) |
|
|
(2.6 |
) |
Long-term debt and finance leases, net |
|
$ |
322.3 |
|
|
$ |
319.0 |
|
As of June 30, 2022, the Company was in compliance with the financial covenants set forth in its debt agreements.
Notes Payable – Non-Contingent Consideration
The Company acquired all the assets of Peaklogix, Inc ("PeakLogix") on June 12, 2020. Pursuant to the asset purchase agreement, sellers are entitled to additional cash payments of a minimum of $2.0 million throughout a 5-year earn-out period. As of June 30, 2022, the Company recorded a $1.9 million liability which included $1.7 million related to present value of these minimum cash payments using a market participant discount rate and $0.2 million of imputed interest. As of December 31, 2021, the liability was $1.8 million. This additional future liability is recorded as non-contingent liability in “Other current liabilities” and “Other liabilities” on the Condensed Consolidated Balance Sheets. See Note 16, Fair Value Instruments, and Note 17, Business Combinations, for further information.
Promissory Note
On June 12, 2020, the Company entered into an unsecured promissory note for $1.0 million at an interest rate of 6.0% on the unpaid principal sum in connection with the PeakLogix acquisition which was due one year from the date of the acquisition and recorded in “Other current liabilities”. During the second quarter of 2021, the Promissory Note of $1.1 million, inclusive of accrued interest, was paid in full.
NOTE 11 — LEASES
The Company adopted Topic 842 and all related amendments effective for the annual reporting period ended December 31, 2021, with an effective date of January 1, 2021, using the modified retrospective method. Comparative 2021 results have been recast to reflect the adoption of Topic 842.
14
The Company primarily has operating and finance leases for branch facilities, corporate office, and certain equipment which encompass both related party and third-party leases. The Company’s leases have remaining lease terms that range from less than one year to leases that mature through March 2037 and contain provisions to renew the leases for additional terms of to twenty years.
The Company leases and subleases certain lift trucks to customers under short and long-term operating lease agreements. The sublease income is included in "Rental revenue" on our Condensed Consolidated Statements of Income (Loss). Sublease income below includes subleases that are not included in "Rental revenue" due to being outside our normal business operations. The costs of the head lease for these subleases are included in operating lease expense below.
At June 30, 2022 and December 31, 2021, assets recorded under finance leases, net of accumulated depreciation were $14.6 million and $11.3 million, respectively. The assets are depreciated over the lower of their related lease terms or their estimated useful lives.
The components of lease expense (including related party leases) were as follows (amounts in millions):
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Operating lease expense |
$ |
6.3 |
|
|
$ |
5.9 |
|
|
$ |
12.3 |
|
|
$ |
11.7 |
|
Short-term lease expense |
|
0.7 |
|
|
|
0.7 |
|
|
|
1.7 |
|
|
|
2.4 |
|
Low-value lease expense |
|
0.1 |
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.4 |
|
Variable lease expense |
|
1.5 |
|
|
|
0.1 |
|
|
|
2.7 |
|
|
|
0.1 |
|
Finance lease expense: |
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of right-of-use assets |
|
0.9 |
|
|
|
0.5 |
|
|
|
1.7 |
|
|
|
0.7 |
|
Interest on lease liabilities |
|
0.2 |
|
|
|
0.1 |
|
|
|
0.4 |
|
|
|
0.2 |
|
Sublease income |
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
Total lease expense |
$ |
9.6 |
|
|
$ |
7.5 |
|
|
$ |
18.8 |
|
|
$ |
15.5 |
|
Other information related to leases is presented in the table below (amounts in millions unless otherwise noted):
Supplemental Cash Flows Information |
Six Months Ended June 30, |
|
|||||
|
2022 |
|
|
2021 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
||
Operating cash flows for operating leases |
$ |
11.8 |
|
|
$ |
11.2 |
|
Operating cash flows for finance leases |
|
0.4 |
|
|
|
0.2 |
|
Financing cash flows for finance leases |
|
1.6 |
|
|
|
0.7 |
|
Non-cash right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
||
Operating leases |
|
4.7 |
|
|
|
5.1 |
|
Finance leases |
|
5.0 |
|
|
|
8.1 |
|
|
|
|
|
|
|
||
Weighted Average Remaining Lease Term (in years): |
|
|
|
|
|
||
|
|
|
|
|
|
||
Operating leases |
|
7.1 |
|
|
|
7.0 |
|
Finance leases |
|
4.8 |
|
|
|
4.9 |
|
|
|
|
|
|
|
||
Weighted Average Discount Rate (in %): |
|
|
|
|
|
||
Operating leases |
|
6.6 |
|
|
|
6.5 |
|
Finance leases |
|
6.0 |
|
|
|
5.6 |
|
15
Minimum future lease payments under non-cancellable operating and finance leases described above as of June 30, 2022 were as follows (amounts in millions):
Years |
|
Operating Leases |
|
|
Finance Leases |
|
||
Remainder of 2022 |
|
$ |
11.3 |
|
|
$ |
2.0 |
|
2023 |
|
|
21.7 |
|
|
|
3.7 |
|
2024 |
|
|
20.4 |
|
|
|
3.6 |
|
2025 |
|
|
17.2 |
|
|
|
3.4 |
|
2026 |
|
|
14.5 |
|
|
|
2.8 |
|
Thereafter |
|
|
46.5 |
|
|
|
1.7 |
|
Total future minimum lease payments |
|
$ |
131.6 |
|
|
$ |
17.2 |
|
Less: imputed interest |
|
|
(30.4 |
) |
|
|
(2.2 |
) |
Total |
|
$ |
101.2 |
|
|
$ |
15.0 |
|
|
|
|
|
|
|
|
||
Amounts recognized in the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 |
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||
Current portion of long-term debt |
|
$ |
3.1 |
|
|
$ |
2.6 |
|
|
|
16.3 |
|
|
|
16.2 |
|
|
|
|
11.9 |
|
|
|
9.0 |
|
|
|
|
84.9 |
|
|
|
88.4 |
|
|
|
|
$ |
116.2 |
|
|
$ |
116.2 |
|
As of June 30, 2022, the Company had additional leases, substantially all real estate and vehicles, that primarily replace expiring leases on certain assets and have not yet commenced with undiscounted lease payments of $8.5 million. These leases are expected to commence in 2022 with lease terms up to 10 years.
See Note 12, Contingencies, for more information on certain contracts where the Company guarantees the performance of the third-party lessee.
NOTE 12 — CONTINGENCIES
Guarantees
As of June 30, 2022 and December 31, 2021, the Company was party to certain contracts in which it guarantees the performance of agreements between third-party lessees and various third-party financial institutions. The terms of the guarantees range from to five years. In the event of a default by a third-party lessee, the Company would be required to pay all or a portion of the remaining unpaid obligations as specified in the contract. The estimated exposure related to these guarantees was $1.4 million and $1.7 million at June 30, 2022 and December 31, 2021, 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 Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021, respectively.
Legal Proceedings
During the six months ended June 30, 2022 and 2021, various claims and lawsuits, incidental to the ordinary course of our business, were pending against the Company. In the opinion of management, after consultation with legal counsel, resolution of these matters is not expected to have a material effect on the Company’s condensed consolidated financial statements.
Contractual Obligations
The Company does not believe there are any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the Company. As of June 30, 2022 and December 31, 2021 there was $4.9 million and $3.4 million in outstanding letters of credits issued in the normal course of business, respectively.
NOTE 13 — INCOME TAXES
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates in effect for the year in which the difference is expected to reverse. Additionally, the impact of changes in the tax rates and laws on deferred taxes, if any, is reflected in the financial statement in the period of enactment. The deferred tax liabilities and assets for the
16
Company represent the difference between the financial statement and tax basis of the partnership interest in Alta Enterprises, LLC. The Company is using the single line-item approach for financial statement presentation of deferred tax assets and liabilities.
The income tax provision for the three and six months ended June 30, 2022 and 2021 consisted of the following (amounts in millions):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Federal taxes-current |
|
$ |
0.4 |
|
|
$ |
— |
|
|
$ |
0.4 |
|
|
$ |
— |
|
Federal taxes-deferred |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
State taxes-current |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
State taxes-deferred |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
|
|
$ |
0.5 |
|
|
$ |
— |
|
|
$ |
0.5 |
|
|
$ |
0.5 |
|
Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are considered in the relevant period. At the end of each interim reporting period, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
The Company recorded an income tax expense of $0.5 million and $0.0 million for the three months ended June 30, 2022 and 2021, respectively, and $0.5 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively. As a result of Alta’s second quarter 2022 analysis of the realizability of its deferred tax asset, and after considering tax planning initiatives and other inputs, Alta determined that it was more likely than not that deferred tax asset would not be realized and has thus maintained a full valuation allowance against the deferred tax asset.
Alta reviews the realizability of its deferred tax asset on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results are considered, along with any other positive or negative evidence. All of the factors that Alta considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involve significant judgment.
The effective tax rate for the six months ended June 30, 2022 and 2021 was 9.3% and (2.2)%, respectively. The effective income tax rate in 2021 was primarily due to the impact of the establishment of the valuation allowance.
As of December 31, 2021, the Company has federal net operating tax loss carryforwards of approximately $42.7 million, which may be carried forward indefinitely and are eligible to offset 80% of future taxable income.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, includes various income and payroll tax provisions, modifications to federal net operating loss rules, business interest deduction limitations, and bonus depreciation eligibility for qualified improvement property.
The CARES Act did not materially impact our effective tax rate for prior periods, although it will impact the timing of future cash payments for taxes. Under the CARES Act, as of both June 30, 2022 and December 31, 2021, we have deferred employer payroll taxes of $5.0 million.
NOTE 14 — EQUITY
Preferred Stock
On December 22, 2020, the Company closed its underwritten public offering of depositary shares, each representing th of a share of 10% Series A Preferred Stock, par value $0.0001 per share. The liquidation preference of each share of Series A Preferred Stock is $25,000 ($25.00 per Depositary Share). At the closing, the Company issued 1,200 shares of Series A Preferred Stock represented by 1,200,000 Depositary Shares issued.
We will pay cumulative cash dividends on the Series A Preferred Stock, when and as declared by our Board of Directors, at the rate of 10% of the $25,000 liquidation preference ($25.00 per depositary share) per year (equivalent to $2,500 or $2.50 per depositary share).
Dividends are payable quarterly in arrears, on or about the last day of January, April, July and October, which began on April 30, 2021; provided that if any dividend payment date is not a business day, then the dividend which would otherwise have been payable on that dividend payment date may be paid on the next succeeding business day, and no interest, additional dividends or other sums will accumulate. Dividends will accumulate and be cumulative from, and including December 22, 2020, the date of original issuance. We declared dividends on our outstanding preferred shares in 2022 and 2021 as shown in the table below.
17
Date dividend declared |
|
Record date |
|
Payment date |
|
Dividend per share ($) |
|
|
April 9, 2021 |
|
April 15, 2021 |
|
April 30, 2021 |
|
$ |
0.890 |
|
July 2, 2021 |
|
July 15, 2021 |
|
August 2, 2021 |
|
$ |
0.625 |
|
October 4, 2021 |
|
October 15, 2021 |
|
November 1, 2021 |
|
$ |
0.625 |
|
January 4, 2022 |
|
January 15, 2022 |
|
January 31, 2022 |
|
$ |
0.625 |
|
April 5, 2022 |
|
April 15, 2022 |
|
May 2, 2022 |
|
$ |
0.625 |
|
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.
During the six months ended June 30, 2022, the Compensation Committee of our Board of Directors approved the grant of 128,574 shares of Restricted Stock Units ("RSUs") and 339,227 shares of Performance Stock Units ("PSUs") to certain directors, officers and employees of the Company under the 2020 Omnibus Incentive Plan. The Company’s plan is to have broad-based, long-term programs intended to attract and retain talented employees and align stockholder and employee interests. We calculated the fair value of the RSUs and PSUs at grant date based on the closing market price of our common stock at the date of grant. The compensation expense is recognized on a straight-line basis over the requisite vesting period of the award. The number of PSUs granted depends on the Company's achievement of target performance goals, which may range from 0% to 200% of the target award amount. The PSUs vest ratably over three years including the one-year performance period.
The Company recognized total RSU compensation expense of $0.5 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively, and $0.8 million and $0.5 for the six months ended June 30, 2022 and 2021, respectively. The Company recognized total PSU compensation expense of $0.3 million for both the three and six months ended June 30, 2022. There were no PSUs granted prior to 2022, therefore there was no PSU expense in 2021.
As of June 30, 2022, the total unrecognized compensation expense related to the non-vested portion of the Company's restricted stock awards was $2.8 million, which is expected to be recognized over a weighted average period of 1.8 years. As of June 30, 2022, the total unrecognized compensation expense related to the non-vested portion of the Company's performance stock awards was $3.8 million, which is expected to be recognized over a weighted average period of 2.3 years.
The following table summarizes our RSUs and PSUs that were granted and vested during the six months ended June 30, 2022:
|
|
Restricted Stock Units |
|
|
Performance Stock Units |
|
||||||||||
|
|
Number of units |
|
|
Weighted average grant date fair value |
|
|
Number of units |
|
|
Weighted average grant date fair value |
|
||||
Unvested units as of December 31, 2021 |
|
|
309,292 |
|
|
$ |
9.71 |
|
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
128,574 |
|
|
|
11.82 |
|
|
|
339,227 |
|
|
|
12.14 |
|
Vested - issued |
|
|
(90,649 |
) |
|
|
9.24 |
|
|
|
— |
|
|
|
— |
|
Vested - unissued |
|
|
(37,324 |
) |
|
|
13.16 |
|
|
|
— |
|
|
|
— |
|
Unvested units as of June 30, 2022 |
|
|
309,893 |
|
|
$ |
10.31 |
|
|
|
339,227 |
|
|
$ |
12.14 |
|
18
NOTE 16 — FAIR VALUE INSTRUMENTS
The carrying value of financial instruments reported in the accompanying Condensed Consolidated Balance Sheets for cash, accounts receivable, accounts payable and accrued expenses payable and other liabilities approximate fair value due to the immediate or short-term nature or maturity of these financial instruments. Based upon current borrowing rates with similar maturities, which are Level 2 fair value inputs, the carrying value of lines of credit, long-term debt, and the guaranteed purchase obligations approximate the fair value as of June 30, 2022 and December 31, 2021.
The following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis:
Contingent Consideration
The contingent consideration liability represents the fair value of the future earn-out liability that the Company may be required to pay in conjunction with the acquisitions upon the achievement of certain performance milestones. The earn-out for the acquisitions is measured at fair value in each reporting period, based on Level 3 inputs, with any change to the fair value recorded in the Condensed Consolidated Statements of Income (Loss).
The following table sets forth, by level of hierarchy, the Company’s recurring measures at fair value as of June 30, 2022 and December 31, 2021, which was presented in “Other current liabilities” and “Other liabilities” on the Condensed Consolidated Balance Sheets (amounts in millions):
|
|
June 30, 2022 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
Liabilities: contingent consideration |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2.9 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2021 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
Liabilities: contingent consideration |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2.8 |
|
The following is a summary of changes to Level 3 instruments as of June 30, 2022 and December 31, 2021 (amounts in millions):
|
Contingent Consideration |
|
|
Balance, January 1, 2021 |
$ |
1.8 |
|
Acquisition of Ginop |
|
0.9 |
|
Change in fair value |
|
0.1 |
|
Balance, December 31, 2021 |
$ |
2.8 |
|
Changes in fair value |
|
0.1 |
|
Balance, June 30, 2022 |
$ |
2.9 |
|
19
NOTE 17 — BUSINESS COMBINATIONS
The following table summarizes the net assets acquired by segment from the 2021 acquisitions (amounts in millions):
|
Material Handling |
|
Construction |
|
Total |
|
|||
Cash |
$ |
0.5 |
|
$ |
1.2 |
|
$ |
1.7 |
|
Accounts receivable, net of allowances |
|
0.9 |
|
|
7.8 |
|
|
8.7 |
|
Inventories, net |
|
0.6 |
|
|
28.2 |
|
|
28.8 |
|
Prepaid expenses and other current assets |
|
0.4 |
|
|
0.6 |
|
|
1.0 |
|
Rental fleet, net |
|
— |
|
|
13.1 |
|
|
13.1 |
|
Property and equipment, net |
|
0.6 |
|
|
3.0 |
|
|
3.6 |
|
Other intangible assets, net |
|
0.9 |
|
|
19.0 |
|
|
19.9 |
|
Goodwill |
|
1.5 |
|
|
19.6 |
|
|
21.1 |
|
Total Assets |
$ |
5.4 |
|
$ |
92.5 |
|
$ |
97.9 |
|
|
|
|
|
|
|
|
|||
Floor plan payable |
|
— |
|
|
(17.1 |
) |
|
(17.1 |
) |
Accounts payable |
|
(0.3 |
) |
|
(4.7 |
) |
|
(5.0 |
) |
Accrued expenses |
|
(0.1 |
) |
|
(2.7 |
) |
|
(2.8 |
) |
Customer deposits |
|
(0.3 |
) |
|
(1.5 |
) |
|
(1.8 |
) |
Other current liabilities |
|
(0.9 |
) |
|
— |
|
|
(0.9 |
) |
Deferred tax liability |
|
— |
|
|
(3.7 |
) |
|
(3.7 |
) |
Other liabilities |
|
— |
|
|
(0.7 |
) |
|
(0.7 |
) |
Total liabilities |
$ |
(1.6 |
) |
$ |
(30.4 |
) |
$ |
(32.0 |
) |
|
|
|
|
|
|
|
|||
Net Assets Acquired |
$ |
3.8 |
|
$ |
62.1 |
|
$ |
65.9 |
|
|
|
|
|
|
|
|
|||
Assets acquired net of cash |
$ |
3.3 |
|
$ |
60.9 |
|
$ |
64.2 |
|
During 2022, we have had purchase price accounting adjustments related to 2021 acquisitions which were not significant individually or in the aggregate. See the Condensed Consolidated Statements of Cash Flows for the total cash outflow in "Expenditures for acquisitions, net of cash acquired." We describe our 2021 acquisitions in more detail in Note 20 of the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.
NOTE 18 — SEGMENTS
The Company has two reportable segments: Material Handling and Construction Equipment. The “Material Handling” segment has been previously reported as our “Industrial” segment. The Company’s segments are determined based on management structure, which is organized based on types of products sold, as described in the following paragraph. The operating results for each segment are reported separately to the Company’s Chief Executive Officer to make decisions regarding the allocation of resources, to assess the Company’s operating performance and to make strategic decisions.
The Material Handling segment is principally engaged in operations related to the sale, service, and rental of lift trucks and other material handling equipment in Michigan, Illinois, Indiana, New York (including New York City), Virginia as well as the New England region (including Boston) of the United States. As of June 30, 2022, the Material Handling segment included the ScottTech and Baron acquisitions and their related results for the quarter.
The Construction Equipment segment is principally engaged in operations related to the sale, service, and rental of construction equipment in Michigan, Illinois, Indiana, Ohio, New York, Florida and the New England region (including Boston) of the United States. As of June 30, 2022 the Construction Equipment segment includes the Gibson, Midwest Mine, Ambrose, and Ginop acquisitions and their related results for the quarter.
The Company retains various unallocated expense items at the general corporate level, which the Company refers to as “Corporate” in the table below. Corporate holds corporate debt and has minor activity all together. Corporate incurs expenses associated with compensation (including share-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.
20
The following table presents the Company’s results of operations by reportable segment for the three months ended June 30, 2022 (amounts in millions):
|
|
Three Months Ended June 30, 2022 |
|
|||||||||||||
|
|
Material |
|
|
Construction |
|
|
Corporate |
|
|
Total |
|
||||
New and used equipment sales |
|
$ |
72.1 |
|
|
$ |
145.2 |
|
|
$ |
— |
|
|
$ |
217.3 |
|
Parts sales |
|
|
20.1 |
|
|
|
38.2 |
|
|
|
— |
|
|
|
58.3 |
|
Service revenue |
|
|
26.9 |
|
|
|
24.8 |
|
|
|
— |
|
|
|
51.7 |
|
Rental revenue |
|
|
14.2 |
|
|
|
29.4 |
|
|
|
— |
|
|
|
43.6 |
|
Rental equipment sales |
|
|
2.2 |
|
|
|
33.4 |
|
|
|
— |
|
|
|
35.6 |
|
Total revenues |
|
$ |
135.5 |
|
|
$ |
271.0 |
|
|
$ |
— |
|
|
$ |
406.5 |
|
Interest expense |
|
|
2.6 |
|
|
|
3.8 |
|
|
|
0.4 |
|
|
|
6.8 |
|
Depreciation and amortization |
|
|
6.1 |
|
|
|
21.2 |
|
|
|
— |
|
|
|
27.3 |
|
Income (loss) before taxes |
|
|
4.9 |
|
|
|
6.3 |
|
|
|
(4.6 |
) |
|
|
6.6 |
|
The following table presents the Company’s results of operations by reportable segment for the six months ended June 30, 2022 (amounts in millions):
|
|
Six Months Ended June 30, 2022 |
|
|||||||||||||
|
|
Material |
|
|
Construction |
|
|
Corporate |
|
|
Total |
|
||||
New and used equipment sales |
|
$ |
139.0 |
|
|
$ |
229.9 |
|
|
$ |
— |
|
|
$ |
368.9 |
|
Parts sales |
|
|
39.3 |
|
|
|
72.4 |
|
|
|
— |
|
|
|
111.7 |
|
Service revenue |
|
|
53.6 |
|
|
|
46.3 |
|
|
|
— |
|
|
|
99.9 |
|
Rental revenue |
|
|
27.0 |
|
|
|
54.3 |
|
|
|
— |
|
|
|
81.3 |
|
Rental equipment sales |
|
|
2.2 |
|
|
|
74.2 |
|
|
|
— |
|
|
|
76.4 |
|
Total revenues |
|
$ |
261.1 |
|
|
$ |
477.1 |
|
|
$ |
— |
|
|
$ |
738.2 |
|
Interest expense |
|
|
4.9 |
|
|
|
7.3 |
|
|
|
0.7 |
|
|
|
12.9 |
|
Depreciation and amortization |
|
|
11.4 |
|
|
|
40.1 |
|
|
|
— |
|
|
|
51.5 |
|
Income (loss) before taxes |
|
|
8.9 |
|
|
|
4.2 |
|
|
|
(7.7 |
) |
|
|
5.4 |
|
The following table presents the Company’s results of operations by reportable segment for the three months ended June 30, 2021 (amounts in millions):
|
|
Three Months Ended June 30, 2021 |
|
|||||||||||||
|
|
Material |
|
|
Construction |
|
|
Corporate |
|
|
Total |
|
||||
New and used equipment sales |
|
$ |
60.1 |
|
|
$ |
71.9 |
|
|
$ |
— |
|
|
$ |
132.0 |
|
Parts sales |
|
|
15.7 |
|
|
|
28.4 |
|
|
|
— |
|
|
|
44.1 |
|
Service revenue |
|
|
24.1 |
|
|
|
18.3 |
|
|
|
— |
|
|
|
42.4 |
|
Rental revenue |
|
|
11.4 |
|
|
|
26.8 |
|
|
|
— |
|
|
|
38.2 |
|
Rental equipment sales |
|
|
0.3 |
|
|
|
35.7 |
|
|
|
— |
|
|
|
36.0 |
|
Total revenues |
|
$ |
111.6 |
|
|
$ |
181.1 |
|
|
$ |
— |
|
|
$ |
292.7 |
|
Interest expense |
|
|
2.0 |
|
|
|
3.7 |
|
|
|
0.3 |
|
|
|
6.0 |
|
Depreciation and amortization |
|
|
4.6 |
|
|
|
19.3 |
|
|
|
— |
|
|
|
23.9 |
|
Income (loss) before taxes |
|
|
1.9 |
|
|
|
(1.7 |
) |
|
|
(14.9 |
) |
|
|
(14.7 |
) |
The following table presents the Company’s results of operations by reportable segment for the six months ended June 30, 2021 (amounts in millions):
|
|
Six Months Ended June 30, 2021 |
|
|||||||||||||
|
|
Material |
|
|
Construction |
|
|
Corporate |
|
|
Total |
|
||||
New and used equipment sales |
|
$ |
117.5 |
|
|
$ |
138.3 |
|
|
$ |
— |
|
|
$ |
255.8 |
|
Parts sales |
|
|
30.9 |
|
|
|
54.6 |
|
|
|
— |
|
|
|
85.5 |
|
Service revenue |
|
|
46.7 |
|
|
|
34.4 |
|
|
|
— |
|
|
|
81.1 |
|
Rental revenue |
|
|
22.5 |
|
|
|
48.8 |
|
|
|
— |
|
|
|
71.3 |
|
Rental equipment sales |
|
|
0.8 |
|
|
|
67.0 |
|
|
|
— |
|
|
|
67.8 |
|
Total revenues |
|
$ |
218.4 |
|
|
$ |
343.1 |
|
|
$ |
— |
|
|
$ |
561.5 |
|
Interest expense |
|
|
4.2 |
|
|
|
6.8 |
|
|
|
0.8 |
|
|
|
11.8 |
|
Depreciation and amortization |
|
|
9.2 |
|
|
|
36.1 |
|
|
|
— |
|
|
|
45.3 |
|
Income (loss) before taxes |
|
|
3.2 |
|
|
|
(5.0 |
) |
|
|
(18.1 |
) |
|
|
(19.9 |
) |
21
The following table presents the Company’s identified assets by reportable segment as of June 30, 2022 and December 31, 2021 (amounts in millions):
|
|
June 30, |
|
|
December 31, |
|
||
Segment assets: |
|
|
|
|
|
|
||
Material handling |
|
$ |
360.0 |
|
|
$ |
325.1 |
|
Construction equipment |
|
|
705.3 |
|
|
|
655.8 |
|
Corporate |
|
|
5.8 |
|
|
|
1.7 |
|
Total assets |
|
$ |
1,071.1 |
|
|
$ |
982.6 |
|
Basic earnings per share is calculated by dividing net income or loss by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding, after giving effect to all potential dilutive equity awards outstanding during the period. We include all common shares granted under our share-based compensation plan which remain unvested (RSUs and PSUs), in the number of shares outstanding for our diluted EPS calculations using the treasury method.
Basic and diluted earnings per share for the three and six months ended June 30, 2022 and 2021 were calculated as follows (amounts in millions, except per share amounts):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Basic net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
$ |
5.4 |
|
|
$ |
(15.8 |
) |
|
$ |
3.4 |
|
|
$ |
(21.5 |
) |
Basic weighted average common shares outstanding |
|
31,933,032 |
|
|
|
32,403,151 |
|
|
|
32,147,015 |
|
|
|
31,204,239 |
|
Basic net income (loss) per share of common stock |
$ |
0.17 |
|
|
$ |
(0.49 |
) |
|
$ |
0.11 |
|
|
$ |
(0.69 |
) |
Diluted income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
$ |
5.4 |
|
|
$ |
(15.8 |
) |
|
$ |
3.4 |
|
|
$ |
(21.5 |
) |
Basic weighted average common shares outstanding |
|
31,933,032 |
|
|
|
32,403,151 |
|
|
|
32,147,015 |
|
|
|
31,204,239 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive non-vested restricted stock units |
|
218,480 |
|
|
|
150,375 |
|
|
|
220,795 |
|
|
|
140,278 |
|
Diluted weighted average common shares outstanding |
|
32,151,512 |
|
|
|
32,553,526 |
|
|
|
32,367,810 |
|
|
|
31,344,518 |
|
Diluted net income (loss) per share of common stock |
$ |
0.17 |
|
|
$ |
(0.49 |
) |
|
$ |
0.11 |
|
|
$ |
(0.69 |
) |
NOTE 20 — SUBSEQUENT EVENTS
On July 6, 2022 the Company Board of Directors (the “Board”) approved the initiation of a regular quarterly cash dividend for each of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share (“common stock”). The common stock dividend is $0.057 per share, or approximately $0.23 per share on an annualized basis. The first common stock dividend will be payable on August 31st, 2022 to shareholders of record as of August 15th, 2022. The continuation of future cash dividends will be determined by the Board, at its sole discretion, after review of the Company’s financial performance and other factors, and is dependent on earnings, operations, capital requirements, general financial condition of the Company and general business conditions.
In addition to its approval of the common stock dividend detailed above, on July 6, 2022 the Company's Board approved a share repurchase program authorizing Alta to repurchase shares of its common stock for an aggregate purchase price of not more than $12.5 million. The share repurchase program is in accordance with Rule 10b-18 of the Exchange Act. Subject to applicable rules and regulations, the Company intends to repurchase shares of its common stock from time-to-time in the open market or by negotiated transactions. Such purchases will be at times and in amounts as the Company deems appropriate, based on market conditions, cash reserves, cash flow and the balancing of uses of cash for operations, growth, and share repurchase. The amount and timing of repurchases will be based on a variety of factors, including stock acquisition price, regulatory limitations and other market and
22
economic factors. No limit was placed on the duration of the repurchase program. The stock repurchase program does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase program at any time.
On July 29, 2022 the Company acquired the stock of Yale Industrial Trucks Inc. ("YIT"), a privately held Canadian equipment distributor with locations in Ontario and Quebec. YIT generated approximately $46.6 million in revenue and adjusted EBITDA of $9.4 million in the trailing twelve months through May 2022. The implied enterprise value of the acquisition is estimated to be approximately $33.5 million, subject to post-closing purchase price adjustments.
In connection with the acquisition of the stock of YIT, on July 6, 2022 the Company amended its Sixth Amended and Restated ABL First Lien Credit Agreement along with its Sixth Amended and Restated Floor Plan First Lien Credit Agreement, both dated April 1, 2021, by and between the Company and other credit parties named therein, and the lender JP Morgan Chase Bank, N.A., as Administrative Agent. The amendment, among other things, (i) exercised $80 million of the $150 million accordion function included in the Company’s asset-based revolving line of credit increasing borrowing capacity from $350 million to $430 million, which includes a $35 million Canadian-denominated sublimit facility; and (ii) increased the maximum borrowing capacity of its revolving floor plan facility by $10 million from $50 million to $60 million.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. This discussion contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 reflecting Alta’s current expectations, estimates and assumptions concerning events and financial trends that may affect its future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward- looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. Alta assumes no obligation to update any of these forward-looking statements.
Recent Developments
Strategic Acquisitions - 2020 and 2021
Our growth strategy is predicated on making strategic acquisitions that expand our geographic reach, broaden our capabilities and service offerings and diversify our customer and supplier bases. We believe these acquisitions, both immediately and over the long-term will be accretive to our financial performance. Post the Company’s initial public offering, in 2020 and 2021 we successfully completed 11 strategic acquisitions which added over $300 million of revenue on an annualized basis. The acquisitions, both individually and in the aggregate, strengthened our business from a financial and operational perspective. We are adept at efficiently and effectively integrating acquisition targets on to our enterprise resource platform, which allows for management and operational synergies across business segments and our large branch network. To that end, in the second quarter, we successfully integrated the Vantage, Gibson, and Ambrose acquisitions onto our enterprise resource platform. See Note 17, Business Combinations, for information on our acquisitions in 2021.
E-Mobility
With our existing expertise in sales and service of electrified equipment in our existing business segments, in particular material handling, we have elected to pursue the strategic opportunity to leverage our knowledge to meet the growing demand for commercial electric vehicles and deliver world-class service to commercial electric vehicle customers within our existing territories. Accordingly, in August 2021, the Company entered into a dealer agreement with Nikola Corporation to become the authorized dealer to sell and service Nikola medium and long-haul class 8 electric vehicle trucks in the New York, New Jersey, eastern Pennsylvania, and New England markets. More recently, we were named the authorized dealer for Nikola in Arizona as well. We view this opportunity as an accretive way to enter the class 8 truck market by leveraging our existing intellectual property, customer base and physical infrastructure.
COVID-19
While there were no material adverse impacts on the Company's results of operations for the three and six months ended June 30, 2022 and 2021 from COVID-19, the potential future emergence of additional variant strains of COVID-19 remains and how those variant strains would impact the macroeconomic environment and our business is uncertain. 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.
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, paving and asphalt equipment, earthmoving equipment and other material handling and construction equipment. We engage in five principal business activities in these equipment categories:
24
We have operated as an equipment dealership for over 37 years and have developed a branch network that includes over 60 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 in June 2020 and 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. We enjoy long-standing relationships with leading material handling and construction equipment OEMs, including Hyster-Yale, Volvo, and JCB, among more than 30 others. We are consistently recognized by OEMs as a top dealership partner and have been identified as a nationally recognized Hyster-Yale dealer and multi-year recipient of the Volvo Dealer of the Year award. In August 2021 the Company entered into a dealer agreement with Nikola Corporation to become the authorized dealer to sell and service Nikola medium and long-haul class 8 electric vehicle trucks in the New York, New Jersey, eastern Pennsylvania, and New England markets. More recently, the Company has added Arizona to its dealer agreement with Nikola.
Business Segments
We have two reportable segments: Material Handling and Construction Equipment. Our “Material Handling” segment has been previously reported as our “Industrial” segment. Our segments are determined based on management structure, which is organized based on types of products sold and customer end markets, as described in the following paragraph. The operating results for each segment are reported separately to our Chief Executive Officer (our chief operating decision maker) to make decisions regarding the allocation of resources, to assess our operating performance and to make strategic decisions.
The Material Handling segment is principally engaged in operations related to the sale, service, and rental of lift trucks in Michigan, Illinois, Indiana, New York, Virginia and throughout the New England states.
The 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.
Alta Equipment Group Inc., Alta Equipment Holdings, Inc. and Alta Enterprises, LLC (individually or as sometimes collectively referred to as “Corporate”) are the holding companies for the legal operating entities noted above that make up each segment. In addition to being holding companies, the Corporate entities also hold compensation (including share-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.
Financial Statement Overview
Our revenues are primarily derived from sale or rental of equipment and product support (e.g. parts and service) related activities, and consist of:
New Equipment Sales. We sell new heavy construction and material handling equipment and are a leading regional distributor for over 30 nationally recognized equipment manufacturers, including Hyster, Yale, Volvo, and JCB. Our new equipment sales operation is a primary source of new customers for the rental, parts and services business. The majority of our new equipment sales is predicated on exclusive distribution agreements we have with best-in-class OEMs. The sale of new equipment to customers, while profitable, acts as a means of generating equipment field population and activity for our higher-margin aftermarket revenue streams, specifically service and parts. We also sell tangential products related to our material handling equipment offerings and, with the acquisition of PeakLogix and ScottTech, we provide warehouse design, automated equipment installation, system integration and warehouse controls software.
Used Equipment Sales. We sell used equipment which is typically equipment that has been taken in on trade from a customer that is purchasing new equipment, equipment coming off a third-party lease arrangement where we purchase the equipment from the finance 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.
Parts Sales. We sell replacement parts to customers and supply parts to our own rental fleet. Our in-house parts inventory is extensive such that we are able to provide timely service support to our customers. The majority of our parts inventory is made up of OEM replacement parts for those OEM’s with which we have exclusive dealership agreements to sell new equipment.
25
Service Support. We provide maintenance and repair services for customer-owned equipment and we maintain our own rental fleet. In addition to repair and maintenance on an as needed or scheduled basis, we provide ongoing preventative maintenance services and warranty repairs for our customers. We have committed substantial resources to training our technical service employees and have a full-scale service infrastructure that we believe differentiates us from our competitors. Approximately half of our employees are skilled service technicians. Training, paid time off, and other non-billable costs of maintaining our expert technicians flow through this department in addition to the direct customer-billable labor.
Equipment Rentals. We rent heavy construction, aerial, material handling, and compact equipment to our customers on a daily, weekly and monthly basis. Our rental fleet, which is well-maintained has an original acquisition cost (which we define as the cost originally paid to manufacturers plus any capitalized costs) of $464.2 million as of June 30, 2022. The original acquisition cost of our rental fleet excludes the $9.9 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.
Rental Equipment Sales. We also sell rental equipment from our rental fleet. Customers often have options to purchase equipment after or before rental agreements have matured. Rental equipment sales, like new and used equipment sales, generate customer-based equipment field population within our territories and ultimately yield high-margin parts and services revenue for us.
Principal Costs and Expenses
Our cost of revenues are primarily related to the cost associated with the sale or rental of equipment and product support activities, which includes direct labor costs for our skilled technicians. Our operating expenses consist principally of general and administrative (“G&A”) expenses, which primarily includes personnel costs associated with our sales and administrative staff and expenses associated with the deployment of our service vehicle fleet and occupancy expenses. In addition, we have interest expense related to our floorplan payables, finance leases, line of credit and secured second lien notes. These principal costs and expenses are described further below:
New Equipment Sales. Cost of new equipment sold primarily consists of the equipment cost of the new equipment that is sold, net of any amount of credit given to the customer from trade-ins of used equipment.
Used Equipment Sales. Cost of used equipment sold consists of the net book value, or cost, of used equipment we purchase from third parties or the trade-in value of used equipment that we obtain from customers in new equipment sales transactions.
Parts Sales. Cost of parts sales represents consists of the net book value, or cost, of parts used in the maintenance and repair of customer-owned equipment we service or parts sold directly to customers for their owned equipment (e.g. over-the-counter parts).
Services Revenue. Cost of services revenues represents, primarily, the labor costs attributable to services provided for the maintenance and repair of customer-owned equipment.
Rental Revenue. Rental expense represents the costs associated with rental equipment, including, among other things, the cost of repairing and maintaining our rental equipment and other miscellaneous costs of owning rental equipment. Other rental expenses consist primarily of equipment support activities that we provide our customers in connection with renting equipment, such as freight services, damage waiver policies, environmental fees and other recovery fees.
Rental Depreciation. Depreciation of rental equipment represents the depreciation costs attributable to rental equipment. Estimated useful lives vary based upon type of equipment. See Note 2 to the audited consolidated financial statements contained in the Company’s 2021 Annual Report on Form 10-K, for information on our rental equipment depreciation methods.
Rental Equipment Sales. Cost of previously rented equipment sold consists of the net book value (i.e. net of accumulated depreciation) of rental equipment sold from our rental fleet.
General and Administrative Expenses. These costs are comprised of three main components: personnel costs, operational costs, and occupancy costs. Personnel costs are comprised of hourly and salaried wages for administrative employees, including incentive compensation, and employee benefits, including medical benefits. Operational costs include marketing activities, costs associated with deploying and leasing our service vehicle fleet, 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 our facility infrastructure, including rent, utilities, property taxes, and building insurance.
Other Income (Expense). 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, our second lien secured notes, and our finance lease arrangements. Also included in this section of the financials are non-recurring costs, in particular expenses associated with the extinguishment of debt in 2021.
26
Results of Operations (amounts in millions unless otherwise noted)
Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021
Consolidated Results
|
Three Months Ended |
|
|
Increase (Decrease) |
|
|
Six Months Ended |
|
|
Increase (Decrease) |
|
||||||||||||||||||||
|
2022 |
|
|
2021 |
|
|
2022 versus 2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 versus 2021 |
|
||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
New and used equipment sales |
$ |
217.3 |
|
|
$ |
132.0 |
|
|
$ |
85.3 |
|
|
|
64.6 |
% |
|
$ |
368.9 |
|
|
$ |
255.8 |
|
|
$ |
113.1 |
|
|
|
44.2 |
% |
Parts sales |
|
58.3 |
|
|
|
44.1 |
|
|
|
14.2 |
|
|
|
32.2 |
% |
|
|
111.7 |
|
|
|
85.5 |
|
|
|
26.2 |
|
|
|
30.6 |
% |
Service revenue |
|
51.7 |
|
|
|
42.4 |
|
|
|
9.3 |
|
|
|
21.9 |
% |
|
|
99.9 |
|
|
|
81.1 |
|
|
|
18.8 |
|
|
|
23.2 |
% |
Rental revenue |
|
43.6 |
|
|
|
38.2 |
|
|
|
5.4 |
|
|
|
14.1 |
% |
|
|
81.3 |
|
|
|
71.3 |
|
|
|
10.0 |
|
|
|
14.0 |
% |
Rental equipment sales |
|
35.6 |
|
|
|
36.0 |
|
|
|
(0.4 |
) |
|
|
(1.1 |
)% |
|
|
76.4 |
|
|
|
67.8 |
|
|
|
8.6 |
|
|
|
12.7 |
% |
Total revenues |
$ |
406.5 |
|
|
$ |
292.7 |
|
|
$ |
113.8 |
|
|
|
38.9 |
% |
|
$ |
738.2 |
|
|
$ |
561.5 |
|
|
$ |
176.7 |
|
|
|
31.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
New and used equipment sales |
$ |
182.2 |
|
|
$ |
112.5 |
|
|
$ |
69.7 |
|
|
|
62.0 |
% |
|
$ |
306.1 |
|
|
$ |
219.0 |
|
|
$ |
87.1 |
|
|
|
39.8 |
% |
Parts sales |
|
40.0 |
|
|
|
30.6 |
|
|
|
9.4 |
|
|
|
30.7 |
% |
|
|
76.7 |
|
|
|
59.3 |
|
|
|
17.4 |
|
|
|
29.3 |
% |
Service revenue |
|
21.9 |
|
|
|
16.4 |
|
|
|
5.5 |
|
|
|
33.5 |
% |
|
|
42.0 |
|
|
|
30.9 |
|
|
|
11.1 |
|
|
|
35.9 |
% |
Rental revenue |
|
5.4 |
|
|
|
5.2 |
|
|
|
0.2 |
|
|
|
3.8 |
% |
|
|
10.8 |
|
|
|
10.7 |
|
|
|
0.1 |
|
|
|
0.9 |
% |
Rental depreciation |
|
23.3 |
|
|
|
21.3 |
|
|
|
2.0 |
|
|
|
9.4 |
% |
|
|
43.6 |
|
|
|
40.7 |
|
|
|
2.9 |
|
|
|
7.1 |
% |
Rental equipment sales |
|
27.9 |
|
|
|
29.8 |
|
|
|
(1.9 |
) |
|
|
(6.4 |
)% |
|
|
61.8 |
|
|
|
56.7 |
|
|
|
5.1 |
|
|
|
9.0 |
% |
Cost of revenues |
$ |
300.7 |
|
|
$ |
215.8 |
|
|
$ |
84.9 |
|
|
|
39.3 |
% |
|
$ |
541.0 |
|
|
$ |
417.3 |
|
|
$ |
123.7 |
|
|
|
29.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit |
$ |
105.8 |
|
|
$ |
76.9 |
|
|
$ |
28.9 |
|
|
|
37.6 |
% |
|
$ |
197.2 |
|
|
$ |
144.2 |
|
|
$ |
53.0 |
|
|
|
36.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
General and administrative expenses |
$ |
88.8 |
|
|
$ |
71.1 |
|
|
$ |
17.7 |
|
|
|
24.9 |
% |
|
$ |
171.7 |
|
|
$ |
135.9 |
|
|
$ |
35.8 |
|
|
|
26.3 |
% |
Depreciation and amortization expense |
|
4.0 |
|
|
|
2.6 |
|
|
|
1.4 |
|
|
|
53.8 |
% |
|
|
7.9 |
|
|
|
4.6 |
|
|
|
3.3 |
|
|
|
71.7 |
% |
Total general and administrative expenses |
$ |
92.8 |
|
|
$ |
73.7 |
|
|
$ |
19.1 |
|
|
|
25.9 |
% |
|
$ |
179.6 |
|
|
$ |
140.5 |
|
|
$ |
39.1 |
|
|
|
27.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income from operations |
$ |
13.0 |
|
|
$ |
3.2 |
|
|
$ |
9.8 |
|
|
|
306.3 |
% |
|
$ |
17.6 |
|
|
$ |
3.7 |
|
|
$ |
13.9 |
|
|
|
375.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense, floor plan payable – new equipment |
$ |
(0.5 |
) |
|
$ |
(0.5 |
) |
|
$ |
— |
|
|
|
— |
|
|
$ |
(0.8 |
) |
|
$ |
(1.0 |
) |
|
$ |
0.2 |
|
|
|
(20.0 |
)% |
Interest expense – other |
|
(6.3 |
) |
|
|
(5.5 |
) |
|
|
(0.8 |
) |
|
|
14.5 |
% |
|
|
(12.1 |
) |
|
|
(10.8 |
) |
|
|
(1.3 |
) |
|
|
12.0 |
% |
Other income |
|
0.4 |
|
|
|
— |
|
|
|
0.4 |
|
|
|
100.0 |
% |
|
|
0.7 |
|
|
|
0.1 |
|
|
|
0.6 |
|
|
|
600.0 |
% |
Loss on extinguishment of debt |
|
— |
|
|
|
(11.9 |
) |
|
|
11.9 |
|
|
|
(100.0 |
)% |
|
|
— |
|
|
|
(11.9 |
) |
|
|
11.9 |
|
|
|
(100.0 |
)% |
Total other expense |
$ |
(6.4 |
) |
|
$ |
(17.9 |
) |
|
$ |
11.5 |
|
|
|
(64.2 |
)% |
|
$ |
(12.2 |
) |
|
$ |
(23.6 |
) |
|
$ |
11.4 |
|
|
|
(48.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) before taxes |
$ |
6.6 |
|
|
$ |
(14.7 |
) |
|
$ |
21.3 |
|
|
|
(144.9 |
)% |
|
$ |
5.4 |
|
|
$ |
(19.9 |
) |
|
$ |
25.3 |
|
|
|
(127.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income tax provision |
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
100.0 |
% |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
— |
|
|
|
— |
|
Net income (loss) |
$ |
6.1 |
|
|
$ |
(14.7 |
) |
|
$ |
20.8 |
|
|
|
(141.5 |
)% |
|
$ |
4.9 |
|
|
$ |
(20.4 |
) |
|
$ |
25.3 |
|
|
|
(124.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Preferred stock dividends |
|
(0.7 |
) |
|
|
(1.1 |
) |
|
|
0.4 |
|
|
|
(36.4 |
)% |
|
|
(1.5 |
) |
|
|
(1.1 |
) |
|
|
(0.4 |
) |
|
|
36.4 |
% |
Net income (loss) available to common shareholders |
$ |
5.4 |
|
|
$ |
(15.8 |
) |
|
$ |
21.2 |
|
|
|
(134.2 |
)% |
|
$ |
3.4 |
|
|
$ |
(21.5 |
) |
|
$ |
24.9 |
|
|
|
(115.8 |
)% |
27
|
|
Percent of Revenue |
|
|
Percent of Revenue |
|
||||||||||
Consolidated |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New and used equipment sales |
|
|
53.5 |
% |
|
|
45.1 |
% |
|
|
50.0 |
% |
|
|
45.6 |
% |
Parts sales |
|
|
14.3 |
% |
|
|
15.1 |
% |
|
|
15.1 |
% |
|
|
15.2 |
% |
Service revenue |
|
|
12.7 |
% |
|
|
14.5 |
% |
|
|
13.5 |
% |
|
|
14.4 |
% |
Rental revenue |
|
|
10.7 |
% |
|
|
13.0 |
% |
|
|
11.0 |
% |
|
|
12.7 |
% |
Rental equipment sales |
|
|
8.8 |
% |
|
|
12.3 |
% |
|
|
10.4 |
% |
|
|
12.1 |
% |
Total revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New and used equipment sales |
|
|
44.8 |
% |
|
|
38.4 |
% |
|
|
41.4 |
% |
|
|
39.0 |
% |
Parts sales |
|
|
9.9 |
% |
|
|
10.4 |
% |
|
|
10.4 |
% |
|
|
10.6 |
% |
Service revenue |
|
|
5.4 |
% |
|
|
5.6 |
% |
|
|
5.7 |
% |
|
|
5.5 |
% |
Rental revenue |
|
|
1.3 |
% |
|
|
1.8 |
% |
|
|
1.5 |
% |
|
|
1.9 |
% |
Rental depreciation |
|
|
5.7 |
% |
|
|
7.3 |
% |
|
|
5.9 |
% |
|
|
7.2 |
% |
Rental equipment sales |
|
|
6.9 |
% |
|
|
10.2 |
% |
|
|
8.4 |
% |
|
|
10.1 |
% |
Cost of revenues |
|
|
74.0 |
% |
|
|
73.7 |
% |
|
|
73.3 |
% |
|
|
74.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
26.0 |
% |
|
|
26.3 |
% |
|
|
26.7 |
% |
|
|
25.7 |
% |
Revenues: Consolidated revenues increased by $113.8 million, or 38.9%, to $406.5 million for the three months ended June 30, 2022 as compared to the same period last year. The primary drivers of this period over period increase were the favorable full period impact from acquisitions, a favorable business climate for our equipment and services, price increases, and our ability to grow on an organic basis. If excluding the effects of acquisitions 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 45.1% over the same period last year as market demand for equipment remains high and we were able to take delivery of more new equipment, relative to last year in the same period, from our suppliers to take advantage of the high demand for equipment. Lead time delays on new equipment continue to limit our ability for even greater new equipment throughput, resulting in large sales order backlogs. Organic parts sales and service revenue increased by 17.0% and 7.8%, respectively, over the same period last year. Similarly, rental revenue exhibited growth on an organic basis of 10.2% period over period as physical utilization trends improve and rental rates have increased amidst industry-wide delays in new equipment deliveries. Lastly, rental equipment sales decreased organically by 9.9% over the prior year as we actively manage our ability to rent fleet amid periods of high rental demand, while remaining opportunistic on fleet sales to meet the strong demand for lightly used equipment given new equipment supply chain constraints. 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 drive profitability in our high margin product support departments.
Consolidated revenues increased by $176.7 million, or 31.5%, to $738.2 million for the six months ended June 30, 2022 as compared to the same period last year. Organic sales growth in the six months ended June 30, 2022 reached 18.4% compared to the same period last year.
Gross profit (GP):
|
|
Three Months Ended June 30, |
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
Consolidated |
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
||||||
New and used equipment sales |
|
|
16.2 |
% |
|
|
14.8 |
% |
|
|
1.4 |
% |
|
|
17.0 |
% |
|
|
14.4 |
% |
|
|
2.6 |
% |
Parts sales |
|
|
31.4 |
% |
|
|
30.6 |
% |
|
|
0.8 |
% |
|
|
31.3 |
% |
|
|
30.6 |
% |
|
|
0.7 |
% |
Service revenue |
|
|
57.6 |
% |
|
|
61.3 |
% |
|
|
(3.7 |
)% |
|
|
58.0 |
% |
|
|
61.9 |
% |
|
|
(3.9 |
)% |
Rental revenue |
|
|
34.2 |
% |
|
|
30.6 |
% |
|
|
3.6 |
% |
|
|
33.1 |
% |
|
|
27.9 |
% |
|
|
5.2 |
% |
Rental equipment sales |
|
|
21.6 |
% |
|
|
17.2 |
% |
|
|
4.4 |
% |
|
|
19.1 |
% |
|
|
16.4 |
% |
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Consolidated gross profit |
|
|
26.0 |
% |
|
|
26.3 |
% |
|
|
(0.3 |
)% |
|
|
26.7 |
% |
|
|
25.7 |
% |
|
|
1.0 |
% |
The consolidated gross profit for the three months ended June 30, 2022 was 26.0%, a 0.3% decrease from the 26.3% for the same period in 2021. Given the high amount of new and used equipment sales in the quarter, this overall decrease in gross profit
28
margin was largely related to our revenue mix shifting to lower profit equipment sales versus our higher profit revenue streams on a relative basis period over period. New and used equipment sales, as well as rental equipment sales, margins improved in the second 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, continues to grow. We realized an increase in rental revenue gross margin in the second quarter of 2022, largely as a result improved physical utilization of the rental fleet and a favorable rental rate environment. Additionally, parts sales gross margins improved modestly while service gross margins reduced, partially 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 six months ended June 30, 2022 was 26.7%, a 1.0% increase from the 25.7% for the same period in 2021
General and Administrative expenses: Consolidated general and administrative (G&A) expenses increased by $19.1 million to $92.8 million for the three months ended June 30, 2022 compared to the same period last year. This increase was mainly driven by the full period impact from our 2021 acquisitions as well as an increases in operating input costs, such as fuel and technician supplies, and an increase in certain sales-based expenses such as sales commissions and marketing expenditures which supported the large increase in equipment sales period over period. Further, employment costs such as wages and benefits increased due to the inflationary environment, a rise in self-insured healthcare costs, and overall growth in our employee headcount.
Consolidated general and administrative (G&A) expenses increased by $39.1 million to $179.6 million for the six months ended June 30, 2022 compared to the same period last year.
Other (expense) income: Consolidated other expense for the three months ended June 30, 2022 was $6.4 million compared to $17.9 million for the same period in 2021. The decrease is primarily due to the loss on debt extinguishment in the second quarter of 2021 of $11.9 million.
Consolidated other expense for the six months ended June 30, 2022 was $12.2 million compared to $23.6 million for the same period in 2021. The decrease is primarily due to the loss on debt extinguishment in the second quarter of 2021 of $11.9 million.
Provision for income taxes: The Company recorded an income tax provision of $0.5 million and $0.0 million for the three months ended June 30, 2022 and 2021, respectively, primarily driven by profitability in the current year that cannot be fully offset with net operating losses.
The Company recorded an income tax provision of $0.5 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively, primarily due to income in the current year that cannot be fully offset with net operating losses and establishing a full valuation allowance against the deferred tax asset in the prior year.
29
Material Handling Results:
|
|
Three Months Ended |
|
|
Increase (Decrease) |
|
|
Six Months Ended |
|
|
Increase (Decrease) |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 versus 2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 versus 2021 |
|
||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
New and used equipment sales |
|
$ |
72.1 |
|
|
$ |
60.1 |
|
|
$ |
12.0 |
|
|
|
20.0 |
% |
|
$ |
139.0 |
|
|
$ |
117.5 |
|
|
$ |
21.5 |
|
|
|
18.3 |
% |
Parts sales |
|
|
20.1 |
|
|
|
15.7 |
|
|
|
4.4 |
|
|
|
28.0 |
% |
|
|
39.3 |
|
|
|
30.9 |
|
|
|
8.4 |
|
|
|
27.2 |
% |
Service revenue |
|
|
26.9 |
|
|
|
24.1 |
|
|
|
2.8 |
|
|
|
11.6 |
% |
|
|
53.6 |
|
|
|
46.7 |
|
|
|
6.9 |
|
|
|
14.8 |
% |
Rental revenue |
|
|
14.2 |
|
|
|
11.4 |
|
|
|
2.8 |
|
|
|
24.6 |
% |
|
|
27.0 |
|
|
|
22.5 |
|
|
|
4.5 |
|
|
|
20.0 |
% |
Rental equipment sales |
|
|
2.2 |
|
|
|
0.3 |
|
|
|
1.9 |
|
|
|
633.3 |
% |
|
|
2.2 |
|
|
|
0.8 |
|
|
|
1.4 |
|
|
|
175.0 |
% |
Total revenues |
|
$ |
135.5 |
|
|
$ |
111.6 |
|
|
$ |
23.9 |
|
|
|
21.4 |
% |
|
$ |
261.1 |
|
|
$ |
218.4 |
|
|
$ |
42.7 |
|
|
|
19.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
New and used equipment sales |
|
$ |
55.9 |
|
|
$ |
48.0 |
|
|
$ |
7.9 |
|
|
|
16.5 |
% |
|
$ |
108.4 |
|
|
$ |
95.0 |
|
|
$ |
13.4 |
|
|
|
14.1 |
% |
Parts sales |
|
|
12.7 |
|
|
|
10.1 |
|
|
|
2.6 |
|
|
|
25.7 |
% |
|
|
24.6 |
|
|
|
20.0 |
|
|
|
4.6 |
|
|
|
23.0 |
% |
Service revenue |
|
|
11.8 |
|
|
|
9.0 |
|
|
|
2.8 |
|
|
|
31.1 |
% |
|
|
22.5 |
|
|
|
17.1 |
|
|
|
5.4 |
|
|
|
31.6 |
% |
Rental revenue |
|
|
1.3 |
|
|
|
1.5 |
|
|
|
(0.2 |
) |
|
|
(13.3 |
)% |
|
|
2.7 |
|
|
|
3.2 |
|
|
|
(0.5 |
) |
|
|
(15.6 |
)% |
Rental depreciation |
|
|
4.2 |
|
|
|
3.4 |
|
|
|
0.8 |
|
|
|
23.5 |
% |
|
|
8.0 |
|
|
|
7.0 |
|
|
|
1.0 |
|
|
|
14.3 |
% |
Rental equipment sales |
|
|
1.4 |
|
|
|
0.2 |
|
|
|
1.2 |
|
|
|
600.0 |
% |
|
|
1.4 |
|
|
|
0.6 |
|
|
|
0.8 |
|
|
|
133.3 |
% |
Cost of revenues |
|
$ |
87.3 |
|
|
$ |
72.2 |
|
|
$ |
15.1 |
|
|
|
20.9 |
% |
|
$ |
167.6 |
|
|
$ |
142.9 |
|
|
$ |
24.7 |
|
|
|
17.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit |
|
$ |
48.2 |
|
|
$ |
39.4 |
|
|
$ |
8.8 |
|
|
|
22.3 |
% |
|
$ |
93.5 |
|
|
$ |
75.5 |
|
|
$ |
18.0 |
|
|
|
23.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
General and administrative expenses |
|
$ |
39.9 |
|
|
$ |
35.0 |
|
|
$ |
4.9 |
|
|
|
14.0 |
% |
|
$ |
78.5 |
|
|
$ |
67.4 |
|
|
$ |
11.1 |
|
|
|
16.5 |
% |
Depreciation and amortization expense |
|
|
1.9 |
|
|
|
1.2 |
|
|
|
0.7 |
|
|
|
58.3 |
% |
|
|
3.4 |
|
|
|
2.2 |
|
|
|
1.2 |
|
|
|
54.5 |
% |
Total general and administrative expenses |
|
$ |
41.8 |
|
|
$ |
36.2 |
|
|
$ |
5.6 |
|
|
|
15.5 |
% |
|
$ |
81.9 |
|
|
$ |
69.6 |
|
|
$ |
12.3 |
|
|
|
17.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income from operations |
|
$ |
6.4 |
|
|
$ |
3.2 |
|
|
$ |
3.2 |
|
|
|
100.0 |
% |
|
$ |
11.6 |
|
|
$ |
5.9 |
|
|
$ |
5.7 |
|
|
|
96.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense, floor plan payable – new equipment |
|
$ |
(0.3 |
) |
|
$ |
(0.2 |
) |
|
$ |
(0.1 |
) |
|
|
50.0 |
% |
|
$ |
(0.4 |
) |
|
$ |
(0.4 |
) |
|
$ |
— |
|
|
|
— |
|
Interest expense – other |
|
|
(2.3 |
) |
|
|
(1.8 |
) |
|
|
(0.5 |
) |
|
|
27.8 |
% |
|
|
(4.5 |
) |
|
|
(3.8 |
) |
|
|
(0.7 |
) |
|
|
18.4 |
% |
Other income |
|
|
1.1 |
|
|
|
0.7 |
|
|
|
0.4 |
|
|
|
57.1 |
% |
|
|
2.2 |
|
|
|
1.5 |
|
|
|
0.7 |
|
|
|
46.7 |
% |
Total other expense |
|
$ |
(1.5 |
) |
|
$ |
(1.3 |
) |
|
$ |
(0.2 |
) |
|
|
15.4 |
% |
|
$ |
(2.7 |
) |
|
$ |
(2.7 |
) |
|
$ |
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
$ |
4.9 |
|
|
$ |
1.9 |
|
|
$ |
3.0 |
|
|
|
157.9 |
% |
|
$ |
8.9 |
|
|
$ |
3.2 |
|
|
$ |
5.7 |
|
|
|
178.1 |
% |
30
|
|
Percent of Revenue |
|
|
Percent of Revenue |
|
||||||||||
Material Handling |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New and used equipment sales |
|
|
53.2 |
% |
|
|
53.8 |
% |
|
|
53.2 |
% |
|
|
53.8 |
% |
Parts sales |
|
|
14.8 |
% |
|
|
14.1 |
% |
|
|
15.1 |
% |
|
|
14.1 |
% |
Service revenue |
|
|
19.9 |
% |
|
|
21.6 |
% |
|
|
20.5 |
% |
|
|
21.4 |
% |
Rental revenue |
|
|
10.5 |
% |
|
|
10.2 |
% |
|
|
10.3 |
% |
|
|
10.3 |
% |
Rental equipment sales |
|
|
1.6 |
% |
|
|
0.3 |
% |
|
|
0.9 |
% |
|
|
0.4 |
% |
Total revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New and used equipment sales |
|
|
41.2 |
% |
|
|
43.0 |
% |
|
|
41.6 |
% |
|
|
43.4 |
% |
Parts sales |
|
|
9.4 |
% |
|
|
9.1 |
% |
|
|
9.4 |
% |
|
|
9.2 |
% |
Service revenue |
|
|
8.7 |
% |
|
|
8.1 |
% |
|
|
8.6 |
% |
|
|
7.8 |
% |
Rental revenue |
|
|
1.0 |
% |
|
|
1.3 |
% |
|
|
1.0 |
% |
|
|
1.5 |
% |
Rental depreciation |
|
|
3.1 |
% |
|
|
3.0 |
% |
|
|
3.1 |
% |
|
|
3.2 |
% |
Rental equipment sales |
|
|
1.0 |
% |
|
|
0.2 |
% |
|
|
0.5 |
% |
|
|
0.3 |
% |
Cost of revenues |
|
|
64.4 |
% |
|
|
64.7 |
% |
|
|
64.2 |
% |
|
|
65.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
35.6 |
% |
|
|
35.3 |
% |
|
|
35.8 |
% |
|
|
34.6 |
% |
Revenues: Material Handling segment revenues increased by $23.9 million to $135.5 million for the three months ended June 30, 2022 as compared to the same period last year. Overall, organic revenue streams were up 19.8%. Despite supply chain delays, organic new and used equipment sales increased 21.9%. Additionally, organic aftermarket parts and service revenues increased 15.9%, and rental revenue increased 25.3% from the same period last year. Positive market conditions helped to influence a year over year improvement in rental fleet utilization, and an elevated pricing environment had a compounding effect on sales growth in the period.
Material Handling segment revenues increased by $42.7 million to $261.1 million for the six months ended June 30, 2022 as compared to the same period last year.
Gross profit (GP):
|
|
Three Months Ended June 30, |
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
||||||
New and used equipment sales |
|
|
22.5 |
% |
|
|
20.1 |
% |
|
|
2.4 |
% |
|
|
22.0 |
% |
|
|
19.1 |
% |
|
|
2.9 |
% |
Parts sales |
|
|
36.8 |
% |
|
|
35.7 |
% |
|
|
1.1 |
% |
|
|
37.4 |
% |
|
|
35.3 |
% |
|
|
2.1 |
% |
Service revenue |
|
|
56.1 |
% |
|
|
62.7 |
% |
|
|
(6.6 |
)% |
|
|
58.0 |
% |
|
|
63.4 |
% |
|
|
(5.4 |
)% |
Rental revenue |
|
|
61.3 |
% |
|
|
57.0 |
% |
|
|
4.3 |
% |
|
|
60.4 |
% |
|
|
54.7 |
% |
|
|
5.7 |
% |
Rental equipment sales |
|
|
36.4 |
% |
|
|
33.3 |
% |
|
|
3.1 |
% |
|
|
36.4 |
% |
|
|
25.0 |
% |
|
|
11.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Segment gross profit |
|
|
35.6 |
% |
|
|
35.3 |
% |
|
|
0.3 |
% |
|
|
35.8 |
% |
|
|
34.6 |
% |
|
|
1.2 |
% |
Material Handling gross profit for the three months ended June 30, 2022 increased 0.3% to 35.6% compared to the same period in 2021. We realized improved new and used equipment gross margin in the second quarter of 2022 when compared to the same period in 2021 as retail pricing for equipment has strengthened amid increased demand for equipment and a dearth of new supply. Also driving the increase in new and used equipment gross margin is a continued shift in revenue mix to our PeakLogix design and build solutions business which realizes higher gross margins than our legacy lift truck business. We also realized an increase in rental revenue gross margin in the second quarter of 2022 as cost of revenues decreased and rental rates for material handling equipment continued to strengthen amid increased demand for equipment and the lack of new supply. Service revenue gross profit margins decreased by 6.6% while the parts sales gross profit margins increased by 1.1% in the second quarter of 2022 compared to the same period in 2021. 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
31
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 for the six months ended June 30, 2022 increased 1.2% to 35.8% compared to the same period in 2021.
General and administrative expenses: Material Handling general and administrative (G&A) expenses increased by $5.6 million to $41.8 million for the three months ended June 30, 2022 as compared to the same period last year. This increase was mainly driven by the full period impact from the 2021 acquisition of Baron in September of 2021, as well as an increase in operating input costs, such as vehicle fuel, and an increase in personnel costs such as wages, sales commissions and bonuses, and employer-sponsored benefits alongside growth in employee headcounts into the segment overall.
Material Handling general and administrative (G&A) expenses increased by $12.3 million to $81.9 million for the six months ended June 30, 2022 as compared to the same period last year.
Other (expense) income: Material Handling other expense increased by $0.2 to $1.5 million for the three months ended June 30, 2022 as compared to the same period last year.
Material Handling other expense stayed at $2.7 million for the six months ended June 30, 2022 as compared to the same period last year.
Construction Equipment Results
|
|
Three Months Ended |
|
|
Increase (Decrease) |
|
|
Six Months Ended |
|
|
Increase (Decrease) |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 versus 2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 versus 2021 |
|
||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
New and used equipment sales |
|
$ |
145.2 |
|
|
$ |
71.9 |
|
|
$ |
73.3 |
|
|
|
101.9 |
% |
|
$ |
229.9 |
|
|
$ |
138.3 |
|
|
$ |
91.6 |
|
|
|
66.2 |
% |
Parts sales |
|
|
38.2 |
|
|
|
28.4 |
|
|
|
9.8 |
|
|
|
34.5 |
% |
|
|
72.4 |
|
|
|
54.6 |
|
|
|
17.8 |
|
|
|
32.6 |
% |
Service revenue |
|
|
24.8 |
|
|
|
18.3 |
|
|
|
6.5 |
|
|
|
35.5 |
% |
|
|
46.3 |
|
|
|
34.4 |
|
|
|
11.9 |
|
|
|
34.6 |
% |
Rental revenue |
|
|
29.4 |
|
|
|
26.8 |
|
|
|
2.6 |
|
|
|
9.7 |
% |
|
|
54.3 |
|
|
|
48.8 |
|
|
|
5.5 |
|
|
|
11.3 |
% |
Rental equipment sales |
|
|
33.4 |
|
|
|
35.7 |
|
|
|
(2.3 |
) |
|
|
(6.4 |
)% |
|
|
74.2 |
|
|
|
67.0 |
|
|
|
7.2 |
|
|
|
10.7 |
% |
Total revenues |
|
$ |
271.0 |
|
|
$ |
181.1 |
|
|
$ |
89.9 |
|
|
|
49.6 |
% |
|
$ |
477.1 |
|
|
$ |
343.1 |
|
|
$ |
134.0 |
|
|
|
39.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
New and used equipment sales |
|
$ |
126.3 |
|
|
$ |
64.5 |
|
|
$ |
61.8 |
|
|
|
95.8 |
% |
|
$ |
197.7 |
|
|
$ |
124.0 |
|
|
$ |
73.7 |
|
|
|
59.4 |
% |
Parts sales |
|
|
27.3 |
|
|
|
20.5 |
|
|
|
6.8 |
|
|
|
33.2 |
% |
|
|
52.1 |
|
|
|
39.3 |
|
|
|
12.8 |
|
|
|
32.6 |
% |
Service revenue |
|
|
10.1 |
|
|
|
7.4 |
|
|
|
2.7 |
|
|
|
36.5 |
% |
|
|
19.5 |
|
|
|
13.8 |
|
|
|
5.7 |
|
|
|
41.3 |
% |
Rental revenue |
|
|
4.1 |
|
|
|
3.7 |
|
|
|
0.4 |
|
|
|
10.8 |
% |
|
|
8.1 |
|
|
|
7.5 |
|
|
|
0.6 |
|
|
|
8.0 |
% |
Rental depreciation |
|
|
19.1 |
|
|
|
17.9 |
|
|
|
1.2 |
|
|
|
6.7 |
% |
|
|
35.6 |
|
|
|
33.7 |
|
|
|
1.9 |
|
|
|
5.6 |
% |
Rental equipment sales |
|
|
26.5 |
|
|
|
29.6 |
|
|
|
(3.1 |
) |
|
|
(10.5 |
)% |
|
|
60.4 |
|
|
|
56.1 |
|
|
|
4.3 |
|
|
|
7.7 |
% |
Cost of revenues |
|
$ |
213.4 |
|
|
$ |
143.6 |
|
|
$ |
69.8 |
|
|
|
48.6 |
% |
|
$ |
373.4 |
|
|
$ |
274.4 |
|
|
$ |
99.0 |
|
|
|
36.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit |
|
$ |
57.6 |
|
|
$ |
37.5 |
|
|
$ |
20.1 |
|
|
|
53.6 |
% |
|
$ |
103.7 |
|
|
$ |
68.7 |
|
|
$ |
35.0 |
|
|
|
50.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
General and administrative expenses |
|
$ |
44.6 |
|
|
|
33.4 |
|
|
$ |
11.2 |
|
|
|
33.5 |
% |
|
$ |
86.1 |
|
|
$ |
63.1 |
|
|
$ |
23.0 |
|
|
|
36.5 |
% |
Depreciation and amortization expense |
|
|
2.1 |
|
|
|
1.4 |
|
|
|
0.7 |
|
|
|
50.0 |
% |
|
|
4.5 |
|
|
|
2.4 |
|
|
|
2.1 |
|
|
|
87.5 |
% |
Total general and administrative expenses |
|
$ |
46.7 |
|
|
$ |
34.8 |
|
|
$ |
11.9 |
|
|
|
34.2 |
% |
|
$ |
90.6 |
|
|
$ |
65.5 |
|
|
$ |
25.1 |
|
|
|
38.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income from operations |
|
$ |
10.9 |
|
|
$ |
2.7 |
|
|
$ |
8.2 |
|
|
|
303.7 |
% |
|
$ |
13.1 |
|
|
$ |
3.2 |
|
|
$ |
9.9 |
|
|
|
309.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense, floor plan payable – new equipment |
|
$ |
(0.2 |
) |
|
$ |
(0.4 |
) |
|
$ |
0.2 |
|
|
|
(50.0 |
)% |
|
$ |
(0.4 |
) |
|
$ |
(0.7 |
) |
|
$ |
0.3 |
|
|
|
(42.9 |
)% |
Interest expense – other |
|
|
(3.6 |
) |
|
|
(3.3 |
) |
|
|
(0.3 |
) |
|
|
9.1 |
% |
|
|
(6.9 |
) |
|
|
(6.1 |
) |
|
|
(0.8 |
) |
|
|
13.1 |
% |
Other expense |
|
|
(0.8 |
) |
|
|
(0.7 |
) |
|
|
(0.1 |
) |
|
|
14.3 |
% |
|
|
(1.6 |
) |
|
|
(1.4 |
) |
|
|
(0.2 |
) |
|
|
14.3 |
% |
Total other expense |
|
$ |
(4.6 |
) |
|
$ |
(4.4 |
) |
|
$ |
(0.2 |
) |
|
|
4.5 |
% |
|
$ |
(8.9 |
) |
|
$ |
(8.2 |
) |
|
$ |
(0.7 |
) |
|
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) |
|
$ |
6.3 |
|
|
$ |
(1.7 |
) |
|
$ |
8.0 |
|
|
|
(470.6 |
)% |
|
$ |
4.2 |
|
|
$ |
(5.0 |
) |
|
$ |
9.2 |
|
|
|
(184.0 |
)% |
32
|
|
Percent of Revenue |
|
|
Percent of Revenue |
|
||||||||||
Construction Equipment |
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New and used equipment sales |
|
|
53.6 |
% |
|
|
39.7 |
% |
|
|
48.2 |
% |
|
|
40.3 |
% |
Parts sales |
|
|
14.1 |
% |
|
|
15.7 |
% |
|
|
15.2 |
% |
|
|
15.9 |
% |
Service revenue |
|
|
9.2 |
% |
|
|
10.1 |
% |
|
|
9.7 |
% |
|
|
10.0 |
% |
Rental revenue |
|
|
10.8 |
% |
|
|
14.8 |
% |
|
|
11.4 |
% |
|
|
14.2 |
% |
Rental equipment sales |
|
|
12.3 |
% |
|
|
19.7 |
% |
|
|
15.5 |
% |
|
|
19.6 |
% |
Total revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New and used equipment sales |
|
|
46.6 |
% |
|
|
35.6 |
% |
|
|
41.4 |
% |
|
|
36.1 |
% |
Parts sales |
|
|
10.1 |
% |
|
|
11.3 |
% |
|
|
10.9 |
% |
|
|
11.5 |
% |
Service revenue |
|
|
3.7 |
% |
|
|
4.1 |
% |
|
|
4.1 |
% |
|
|
4.0 |
% |
Rental revenue |
|
|
1.5 |
% |
|
|
2.0 |
% |
|
|
1.7 |
% |
|
|
2.2 |
% |
Rental depreciation and amortization |
|
|
7.0 |
% |
|
|
10.0 |
% |
|
|
7.5 |
% |
|
|
9.8 |
% |
Rental equipment sales |
|
|
9.8 |
% |
|
|
16.3 |
% |
|
|
12.7 |
% |
|
|
16.4 |
% |
Cost of revenues |
|
|
78.7 |
% |
|
|
79.3 |
% |
|
|
78.3 |
% |
|
|
80.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
21.3 |
% |
|
|
20.7 |
% |
|
|
21.7 |
% |
|
|
20.0 |
% |
Revenues: Construction Equipment segment revenues increased by $89.9 million to $271.0 million for the three months ended June 30, 2022 as compared to the same period last year. This increase was mainly attributable to the full period results from the Ginop, Ambrose, Midwest Mine, and Gibson acquisitions that occurred throughout the second half of 2021. On an organic basis, new and used equipment sales increased 64.4% over the same period last year as market demand for equipment remains high while we were able to take delivery of more new equipment relative to the same period last year. Parts and service revenues increased 9.6% on an organic basis when compared to the same period last year primarily based on higher counter parts sales and a growing technician headcount. Rental revenue has increased 3.8% on an organic basis when compared to the prior year, and rental equipment sales declined 9.1% organically as we strategically balance the decision to retain fleet to benefit from the elevated rental rate environment but still accommodate sales into our territories to bolster field population for longer term returns in our product support departments. Our rental department experienced improvements in both physical utilization and rental rates from the same time a year ago, and demand remained high for customers seeking the purchase of lightly used equipment amid OEM production shortages for new equipment.
Construction Equipment segment revenues increased by $134.0 million to $477.1 million for the six months ended June 30, 2022 as compared to the same period last year.
Gross profit (GP):
|
|
Three Months Ended June 30, |
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
|
GP% |
|
||||||
New and used equipment sales |
|
|
13.0 |
% |
|
|
10.3 |
% |
|
|
2.7 |
% |
|
|
14.0 |
% |
|
|
10.3 |
% |
|
|
3.7 |
% |
Parts sales |
|
|
28.5 |
% |
|
|
27.8 |
% |
|
|
0.7 |
% |
|
|
28.0 |
% |
|
|
28.0 |
% |
|
|
— |
|
Service revenue |
|
|
59.3 |
% |
|
|
59.6 |
% |
|
|
(0.3 |
)% |
|
|
57.9 |
% |
|
|
59.9 |
% |
|
|
(2.0 |
)% |
Rental revenue |
|
|
21.1 |
% |
|
|
19.4 |
% |
|
|
1.7 |
% |
|
|
19.5 |
% |
|
|
15.6 |
% |
|
|
3.9 |
% |
Rental equipment sales |
|
|
20.7 |
% |
|
|
17.1 |
% |
|
|
3.6 |
% |
|
|
18.6 |
% |
|
|
16.3 |
% |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Segment gross profit |
|
|
21.3 |
% |
|
|
20.7 |
% |
|
|
0.6 |
% |
|
|
21.7 |
% |
|
|
20.0 |
% |
|
|
1.7 |
% |
Construction Equipment gross profit increased by 0.6% to 21.3% in the three months ended June 30, 2022 from 20.7% in the same period in 2021. New and used equipment sales margins as well as rental equipment sales margins improved compared to the same period in 2021 amidst a supply-constrained marketplace causing retail prices to rise. Parts sales margins improved 0.7% in the second quarter of 2022 compared to the same period in 2021. Service revenue margins were 59.3% in the second quarter of 2022, in line with the same period last year. Rental revenue gross margins improved amid strengthening physical utilization and a positive rental rate environment.
Construction Equipment gross profit increased by 1.7% to 21.7% in the six months ended June 30, 2022 from 20.0% in the same period in 2021.
33
General and Administrative expenses: Construction Equipment general and administrative (G&A) expenses increased by $11.9 million to $46.7 million for the three months ended June 30, 2022 as compared to the same period in 2021. The quarter over quarter increase was mainly attributable to the full period G&A impact as a result of the construction segment acquisitions of Ginop, Ambrose, Midwest Mine and Gibson throughout the second half of 2021. Beyond the influence of the acquisitions, we experienced increases in operating input costs, such as fuel and technician supplies, and an increase in certain sales-based expenses such as sales commissions and marketing expenditures, which supported the large increase in new and used equipment sales for the quarter. Additionally, we realized increases in personnel costs such as wages, sales commissions and bonuses, and employer-sponsored benefits, a result of inflationary factors and general headcount increases in the segment.
Construction Equipment general and administrative (G&A) expenses increased by $25.1 million to $90.6 million for the six months ended June 30, 2022 as compared to the same period in 2021.
Other (expense) income: Construction Equipment other expense increased by $0.2 million to $4.6 million for the three months ended June 30, 2022 as compared to the same period in 2021. The quarter over quarter increase was mainly due to the interest expense related to the 2021 acquisitions, as the acquisitions were largely financed through our line of credit and floorplan financing facilities.
Construction Equipment other expense increased by $0.7 million to $8.9 million for the six months ended June 30, 2022 as compared to the same period in 2021.
Liquidity and Capital Resources
Six months ended June 30, 2022 compared with six months ended June 30, 2021 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, 2022, operating activities resulted in net cash provided by operations of $3.4 million. Our reported net income of $4.9 million, when adjusted for non-cash income and expense items, such as depreciation and amortization, inventory obsolescence and bad debt reserves, and share-based compensation, provided net cash inflows of $47.9 million. Changes in working capital included $131.7 million of net new inventory purchased, and a $30.7 million increase in accounts receivable. Cash flows from operating activities were favorably impacted by $76.4 million due to proceeds from the sale of rental equipment, $31.7 million in net inflows related to manufacturer floor plans and a $16.7 million increase in accounts payable, accrued expenses, customer deposits, and other current liabilities and unfavorably impacted by $6.9 million net change in prepaid expenses and other assets and leases, deferred revenue, and other liabilities.
For the six months ended June 30, 2021, operating activities resulted in net cash provided by operations of $10.2 million. Our reported net loss of $20.4 million, when adjusted for non-cash income and expense items, such as depreciation and amortization, inventory obsolescence and bad debt reserves, loss on debt extinguishment, and share-based compensation, provided net cash inflows of $30.4 million. Changes in working capital included a $85.6 million increase in inventories, a $18.6 million increase in accounts receivable, a $19.2 million increase in accounts payable, accrued expenses, customer deposits, and other current liabilities, and $6.0 million net increase on manufacturer floor plans payable. Cash flows from operating activities were favorably impacted by a $67.8 million change in proceeds from the sale of rental equipment, and unfavorably impacted by a net $9.0 million change in prepaid expenses and other assets and leases, deferred revenue, and other liabilities.
Cash Flow from Investing Activities. For the six months ended June 30, 2022, our cash used in investing activities was $37.4 million. This was mainly due to $35.9 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 and $1.5 million use of cash for adjustments to the recent Ambrose and Gibson acquisitions purchase prices.
For the six months ended June 30, 2021, our cash used in investing activities was $28.8 million. This was mainly due to $26.2 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 and $2.6 million use of cash for the ScottTech acquisition and Howell working capital adjustment.
Cash Flow from Financing Activities. For the six months ended June 30, 2022, cash provided by financing activities was $32.2 million. The favorable impact was mainly due to $24.9 million of net proceeds under our lines of credits and net proceeds of $12.1 million related to floor plans with an unaffiliated source (i.e. a non-vendor). This was partially offset by $1.6 million payments on finance lease obligations, $1.5 million related to preferred dividend payments and $1.7 million related to other financing activities.
For the six months ended June 30, 2021, cash provided by financing activities was $19.2 million. The favorable impact was mainly due to $310.2 million net proceeds from the Notes issuance partially offset by $153.1 million payments related to the extinguishment of term loan, $126.2 million of net payments under our lines of credits, $5.4 million payments related to floor plans with an unaffiliated source (i.e. a non-vendor), $2.6 million payments on long-term debt and finance lease obligations, $2.1 million payments related to preferred dividend and promissory note, and $1.6 million of payments related to debt issuance costs.
34
Sources of Liquidity
The Company reported $0.5 million in cash for the six months ended June 30, 2022. As of June 30, 2022, we had $327.0 million of available borrowings under the revolving line of credit and floor plans.
Senior Secured Second Lien Notes
On April 1, 2021, the Company completed a private offering of $315.0 million of its 5.625% Notes due 2026. The Notes were offered and sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended, pursuant to a purchase agreement among the Company, the guarantors party thereto and J.P. Morgan Securities LLC, as representative of the initial purchasers. The Notes are guaranteed by the guarantors on a second lien, senior secured basis. The Notes were issued pursuant to an indenture dated April 1, 2021 among the Company, the guarantors and Wilmington Trust, National Association, as trustee and as collateral agent. The Notes mature on April 15, 2026. Interest on the Notes is payable in cash on April 15 and October 15 of each year, beginning on October 15, 2021. As of June 30, 2022, outstanding borrowings under the Notes were $310.4 million, which included $4.6 million deferred financing costs and original issue discounts. The effective interest rate on the Notes, taking into account the original issue discount, is 5.93%.
Line of Credit and First Lien Floor Plan Facility
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 revolving line of credit 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. The ABL Facility are supported by eligible accounts receivable, parts, and otherwise unencumbered new and used equipment inventory and rental equipment. The ABL Facility, which is collateralized by substantially all assets of the Company, has a maximum borrowing capacity of $350.0 million, subject to the borrowing base limitation in the Amended and Restated Credit Agreement, and interest cost is the SOFR plus an applicable margin on the CB Floating Rate, depending on borrowing levels. The ABL Facility matures on the earlier of April 1, 2026 or December 1, 2025 if any of the Notes remain outstanding as of December 1, 2025. As of June 30, 2022, the Company had an outstanding ABL Facility balance of $125.6 million, excluding unamortized debt issuance costs.
Effective April 1, 2021, 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 specific equipment that provides for borrowings of up to the lesser of $50.0 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. 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 June 30, 2022, the Company had an outstanding balance on their First Lien Floor Plan Facility of $42.7 million, excluding unamortized debt issuance costs.
Original Equipment Manufacturer (“OEM”) Captive Lenders and Suppliers’ Floor Plans
OEM captive lender and suppliers’ floor plans payable are financing arrangements for new and used inventory and rental equipment. We have such arrangements with several OEM captive lenders and suppliers each with borrowing capacities ranging from $0.1 million to $102.0 million. Certain floor plans provide for a five to twelve-month interest only or deferred payment period. In addition, these floor plan agreements provide for interest or principal free terms at the supplier’s discretion. The Company routinely sells equipment that is financed under OEM captive lender floor plans prior to the original maturity date of the financing agreement. The related OEM captive lender floor plans payable is then due and payable at the time the equipment being financed is sold. As of June 30, 2022 and December 31, 2021, the Company had an outstanding balance on the OEM Floor Plan Facilities of $156.0 million and $124.3 million, respectively.
Maximum borrowings under the floor plans and the revolving line of credit are limited to $700.0 million. The total amount outstanding as of June 30, 2022 and December 31, 2021 was $324.3 million and $255.6 million, exclusive of debt issuance and deferred financings costs of $2.1 million and $2.4 million, respectively.
Cash Requirements Related to Operations
Our principal sources of liquidity have been from cash provided by our service-related operations and the sales of new, used and rental fleet equipment along with rentals of such equipment, proceeds from the issuance of debt, and borrowings available under our lines of credit and floor plans. Our principal uses of cash have been to fund operating activities and working capital (including new and used equipment inventories), purchases of rental fleet equipment and property and equipment, fund payments due under lines of credit and floor plans payable, fund acquisitions, meet debt service requirements and funding the Preferred Stock dividend. In the future, we may pursue additional strategic acquisitions and seek to open new start-up locations. We anticipate that the uses described above encompass the principal demands on our cash and availability under our lines of credit in the future.
The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. Our gross rental fleet capital expenditures for the period ended June 30, 2022 was approximately $100.2 million,
35
including $69.9 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 $76.4 million for the period ended June 30, 2022 as our business model is to sell lightly used inventory to customers from our rental fleet so as to increase field population in our geographies. In response to changing economic conditions, we have the flexibility to modify our capital expenditures, especially as it relates to rental fleet.
To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness, will depend upon our future operating performance and the availability of borrowings under the lines of credit and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash, and available borrowings under the lines of credit will be adequate to meet our future liquidity needs for the foreseeable future.
We cannot provide absolute assurance that our future cash flow from operating activities will be sufficient to meet our long-term obligations and commitments. If we are unable to generate sufficient cash flow from operating activities in the future to service our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or operations, or seeking to raise additional debt or equity capital. Given current economic and market conditions, including the volatility in the global capital markets, we cannot assure investors that any of these actions could be affected on a timely basis or on satisfactory terms or at all, or that these actions would enable us to continue to satisfy our capital requirements. In addition, our existing debt agreements, as well as any future debt agreements, contain or may contain restrictive covenants, which may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt.
The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the Company. As of June 30, 2022, there was $4.9 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 third-party lessees and various third-party leasing companies. The terms of the guarantees range from two to five years. In the event of a default by a third-party lessee, the Company would be required to pay all, or a portion of the remaining unpaid lease obligation as specified in the contract. The estimated exposure related to these guarantees was $1.4 million and $1.7 million at June 30, 2022 and December 31, 2021, 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 Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021, respectively.
Critical accounting policies
In the preparation of condensed consolidated financial statements prepared in conformity with U.S. GAAP, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. Our management, on an ongoing basis, reviews these estimates and assumptions. While we believe the estimates and judgments we use in preparing our condensed consolidated financial statements are appropriate, they are subject to future events and uncertainties regarding their outcome and, therefore, actual results may materially differ from these estimates. Refer to Part I, Item 1, Note 2 of the notes to our condensed consolidated financial statements for disclosures regarding the use of estimates and assumptions.
Additionally, see Note 2 to the audited consolidated financial statements contained in the Company’s 2021 Annual Report on Form 10-K for a summary of our significant accounting policies.
36
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk primarily consists of interest rate risk associated with our variable and fixed rate debt.
Our earnings may be affected by changes in interest rates since interest expense on the ABL Facility and Floor Plan Facilities are currently calculated based upon (a) the prime rate less an applicable margin of 0.75% and (b) the SOFR plus an applicable margin of 2.75%.
At June 30, 2022 and December 31, 2021, we had $125.6 million and $100.7 million, respectively, outstanding borrowings under the ABL Facility. At June 30, 2022 and December 31, 2021, we had $198.7 million and $154.9 million, respectively, outstanding borrowings under the Floor Plan Facilities. As of June 30, 2022, based upon the amount of our variable rate debt outstanding, our annual pre-tax earnings would decrease by approximately $2.1 million for each one percentage point increase in the interest rates applicable to our variable rate debt. The amount of variable rate indebtedness outstanding may fluctuate significantly. See Note 9, Lines of Credit and Floor Plans, in our condensed consolidated financial statements for additional information concerning the terms of our variable rate debt.
We have fixed rate Notes of $315.0 million which are due in 2026. We did not have significant exposure to changing interest rates as of June 30, 2022 on the fixed rate Notes. For additional information concerning the terms of our fixed rate debt, see Note 10, Long-Term Debt.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to conduct an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2022
Refer to Item 9A. Controls and Procedures in the 2021 Annual Report on Form 10-K for more information on the material weaknesses identified leading to the conclusion that our internal control over financial reporting was not effective as of December 31, 2021. As of June 30, 2022, these material weaknesses have not been fully remediated. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting.
Our Chief Executive Officer and Chief Financial Officer have certified that, based on each such officer’s knowledge, the financial statements, and other financial information included in this Quarterly Report on Form 10-Q, fairly present in all material respects our financial condition, results of operations, and cash flows as of, and for, the periods presented in this Quarterly Report on Form 10-Q. We are in the process of executing our remediation plan for the material weaknesses, which is described below.
Remediation
Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include:
37
We believe that these actions will remediate the material weaknesses. The weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. While there can be no assurance that our efforts will be successful, we expect that the remediation of these material weaknesses will be completed prior to the end of fiscal 2022.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
38
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Other than routine legal proceedings incident to our business, there are no material legal proceedings to which we are a party or to which any of our property is subject.
Item 1A. Risk Factors.
We face a number of uncertainties and risks that are difficult to predict and many of which are outside of our control. For a detailed discussion of the risks that affect our business, please refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There have been no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibit Number |
|
Description |
3.1 |
|
|
3.2 |
|
|
3.3 |
|
|
4.1 |
|
|
4.2 |
|
|
4.3 |
|
|
4.4 |
|
|
4.5 |
|
|
4.6 |
|
|
4.7 |
|
39
4.8 |
|
|
4.9 |
|
|
4.10 |
|
|
10.1 |
|
|
10.2 |
|
|
10.3 |
|
|
10.4 |
|
|
10.5 |
|
|
10.6 |
|
|
10.7 |
|
|
10.8 |
|
|
10.9 |
|
|
10.10 |
|
|
10.11* |
|
|
10.12* |
|
Form of Restricted Stock Unit Agreement (Non-Employee Director) |
10.13* |
|
|
31.1* |
|
|
31.2* |
|
40
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
EX-104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
*Filed herewith.
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
ALTA EQUIPMENT GROUP INC. |
|
|
|
|
|
Date: August 9, 2022 |
|
By: |
/s/ Anthony J. Colucci |
|
|
|
Anthony J. Colucci |
|
|
|
Chief Financial Officer (Principal Financial Officer) |
42
EXHIBIT 10.11
ALTA EQUIPMENT GROUP INC.
EMPLOYEE
RESTRICTED STOCK UNIT AGREEMENT
* * * * *
Participant: _______________
Grant Date: _______________
Number of Restricted Stock Units Granted: _______________
* * * * *
THIS EMPLOYEE RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between ALTA EQUIPMENT GROUP INC., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Alta Equipment Group Inc. 2020 Omnibus Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Administrator (as defined in the Plan).
WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the Restricted Stock Units (“RSUs”) provided herein to the Participant.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby mutually covenant and agree as follows:
EXHIBIT 10.11
EXHIBIT 10.11
(a) The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 9.
(b) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Shares issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such Shares and the Company is under no obligation to register such Shares (or to file a “re-offer prospectus”).
(c) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 will not be available unless (A) a public trading market then exists for the Common Stock of the Company, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the Shares issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.
EXHIBIT 10.11
EXHIBIT 10.11
[Remainder of Page Intentionally Left Blank]
By signing below, the Participant hereby acknowledges receipt of the RSUs issued on the Grant Date indicated above, which have been issued under the terms and conditions of the Plan and this Agreement.
ALTA EQUIPMENT GROUP INC.
By:________________________________
Accepted by:
___________________________________
Date:_______________________________
EXHIBIT 10.12
ALTA EQUIPMENT GROUP INC.
DIRECTOR
RESTRICTED STOCK UNIT AGREEMENT
* * * * *
Participant: ___________________
Grant Date: ___________________
Number of Restricted Stock Units Granted: _________
* * * * *
THIS DIRECTOR RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between ALTA EQUIPMENT GROUP INC., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Alta Equipment Group Inc. 2020 Omnibus Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Administrator (as defined in the Plan).
WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the Restricted Stock Units (“RSUs”) provided herein to the Participant.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby mutually covenant and agree as follows:
EXHIBIT 10.12
EXHIBIT 10.12
(a) The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 10.
(b) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Shares issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such Shares and the Company is under no obligation to register such Shares (or to file a “re-offer prospectus”).
(c) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 will not be available unless (A) a public trading market then exists for the Common Stock of the Company, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the Shares issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.
EXHIBIT 10.12
EXHIBIT 10.12
[Remainder of Page Intentionally Left Blank]
By signing below, the Participant hereby acknowledges receipt of the RSUs issued on the Grant Date indicated above, which have been issued under the terms and conditions of the Plan and this Agreement.
ALTA EQUIPMENT GROUP INC.
By:________________________________
Name:______________________________
Title:_______________________________
Accepted by:
___________________________________
Date:_______________________________
4811-0323-4262, v. 2
EXHIBIT 10.13
ALTA EQUIPMENT GROUP INC.
EMPLOYEE
PERFORMANCE STOCK UNIT AGREEMENT
* * * * *
Participant: ______________________
Grant Date: ______________________
Target Number of Performance Stock Units Granted: ______________________
* * * * *
THIS EMPLOYEE PERFORMANCE STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between ALTA EQUIPMENT GROUP INC., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Alta Equipment Group Inc. 2020 Omnibus Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Administrator.
WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the Performance Stock Units (“PSUs”) provided herein to the Participant.
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby mutually covenant and agree as follows:
EXHIBIT 10.13
Vesting Percentage |
Vesting Date |
50% |
April 1 of the second calendar year following the applicable Performance Period. |
50% |
February 14 of the following calendar year |
EXHIBIT 10.13
(a) The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 9.
(b) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Shares issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such Shares and the Company is under no obligation to register such Shares (or to file a “re-offer prospectus”).
(c) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 will not be available unless (A) a public trading market then exists for the Common Stock of the Company, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the Shares issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.
EXHIBIT 10.13
EXHIBIT 10.13
[Remainder of Page Intentionally Left Blank]
EXHIBIT 10.13
By signing below, the Participant hereby acknowledges receipt of the PSUs issued on the Grant Date indicated above, which have been issued under the terms and conditions of the Plan and this Agreement.
ALTA EQUIPMENT GROUP INC.
By: _________________________________
Accepted by:
___________________________________
Participant
Date:_______________________________
EXHIBIT 10.13
Exhibit I
Performance Measures
The number of PSUs earned shall be determined by reference to: (i) the Company's Economic EBIT Yield, and (ii) the Company’s Adjusted Pre-Tax Net Income (Loss).
For the purpose of this Exhibit 1, the following words have the meaning provided below:
Adjusted Pre-Tax Net Income (Loss) means: GAAP net income (loss) adjusted to reflect certain one-time or non-recurring items, income tax expense and other adjustments (as determined by the Committee in its discretion).
Economic EBIT Yield means adjusted EBITDA (as determined by the Committee in its discretion) less floorplan interest on showroom ready inventory less gain on rental sales less maintenance capex divided by invested capital.
EBITDA means the Company’s earnings before interest, taxes, depreciation and amortization.
Determining PSUs Earned
Except as otherwise provided in the Plan or the Agreement, the number of PSUs earned with respect to the Performance Period shall be determined as follows:
Target |
Percentage Target PSUs Earned |
0%-49.99% |
0% |
50%-54.99% |
|
55%-59.99% |
|
60%-69.99% |
|
70%-79.99% |
|
80%-89.99% |
|
90%-99.99% |
|
100%-104.99% |
|
105%-109.99% |
|
110%-114.99% |
|
115%-119.99% |
|
120%-124.99% |
|
125%-129.99% |
|
130%-134.99% |
|
135%-139.99% |
|
140%-144.99% |
|
145%-149.99% |
|
150%-154.99% |
|
155%-159.99% |
|
160%-164.99% |
|
165%-169.99% |
|
170%-174.99% |
|
175%-179.99% |
|
180%-184.99% |
|
185%-189.99% |
|
190%-194.99% |
|
195%-199.99% |
|
200% |
|
Award Range
EXHIBIT 10.13
Depending on the Company's Economic EBIT Yield and the Company’s adjusted pre-tax income, the Participant may earn between 0% and [ ]% of the Target PSUs as detailed above.
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Ryan Greenawalt, certify that:
Date: August 9, 2022 |
By: |
/s/ Ryan Greenawalt |
|
|
Ryan Greenawalt |
|
|
Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Anthony J. Colucci, certify that:
Date: August 9, 2022 |
By: |
/s/ Anthony J. Colucci |
|
|
Anthony J. Colucci |
|
|
Chief Financial Officer (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report of Alta Equipment Group Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ryan Greenawalt, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
Date: August 9, 2022
|
|
|
|
/s/ Ryan Greenawalt |
|
|
Name: |
Ryan Greenawalt |
|
Title: |
Chief Executive Officer |
|
|
(Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report of Alta Equipment Group Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony J. Colucci, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
Date: August 9, 2022
|
|
|
|
/s/ Anthony J. Colucci |
|
|
Name: |
Anthony J. Colucci |
|
Title: |
Chief Financial Officer |
|
|
(Principal Financial Officer) |