Filed Pursuant to Rule 424(b)(1)
Registration No. 333-251097

 

PROSPECTUS

 

 

Alta Equipment Group Inc.

1,190,000 Depositary Shares

 

 

Each Representing 1/1000^th of a Share of 10% Series A Cumulative Perpetual Preferred Stock (Liquidation Preference Equivalent to $25.00 Per Depositary Share)

 

 

Alta Equipment Group Inc. is offering 1,190,000 depositary shares, each representing a 1/1000th fractional interest in a share of 10% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”), which we refer to in this prospectus as the depositary shares. 1,190 shares of Series A Preferred Stock underlying the depositary shares will be deposited with Continental Stock Transfer & Trust Company, as depositary. As a holder of the depositary shares, you will be entitled to all proportional rights, preferences and privileges of the Series A Preferred Stock represented thereby, including dividend, voting, redemption and liquidation rights and preferences. The proportionate liquidation preference of each depositary share is $25.00.

We will pay cumulative distributions on the Series A Preferred Stock underlying the depositary shares, from, and including, the date of original issuance, in the amount of $2.50 per depositary share each year, which is equivalent to 10% of the $25.00 liquidation preference per depositary share. Dividends on the Series A Preferred Stock will be payable quarterly in arrears, on or about the last day of January, April, July and October of each year (or, if not on a business day, on the next succeeding business day). The first dividend on the depositary shares sold in this offering will be paid on or about April 30, 2021.

Investing in the depositary shares involves a high degree of risk. You should carefully consider the risks described under “Risk Factors” beginning on page 13 of this prospectus.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

		Per Share				Total
Public offering price(1)		$	25.00			$	29,750,000
Underwriting discount(2)		$	1.00			$	1,190,000
Proceeds, before expenses, to us(3)		$	24.00			$	28,560,000

 

(1)	Plus accrued dividends, if any, from the original date of issue.

(2)	See “Underwriting (Conflicts of Interest)” for a description of all underwriting compensation payable in connection with this offering.

(3)	Assumes no exercise of the underwriters’ option described below.

We have granted the underwriters an option to purchase up to an additional 10,000 depositary shares within 30 days from the date of this prospectus. If the underwriters exercise the option in full, the total underwriting discounts and commissions payable by us will be $1,200,000 (excluding the structuring fee), and the total proceeds to us, before payment of the structuring fee and expenses will be $28,800,000.

B. Riley Securities, Inc. (“B. Riley Securities”) has a “conflict of interest” in this offering within the meaning of Financial Industry Regulatory Authority (“FINRA”) Rule 5121, and this offering will be conducted in compliance with Rule 5121. This rule requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and this prospectus and exercise the usual standards of due diligence with respect thereto. Boenning & Scattergood, Inc. (“Boenning & Scattergood”) has assumed the responsibilities of acting as a “qualified independent underwriter” within the meaning of Rule 5121 in connection with this offering.

The underwriters expect to deliver the depositary shares to purchasers on or about December 22, 2020.

Joint Book-Running Managers

 

B. Riley Securities		D.A. Davidson & Co.		Ladenburg Thalmann			William Blair & Company

Lead-Manager

Boenning & Scattergood

Co-Managers

 

Huntington Capital Markets		Colliers Securities

The date of this prospectus is December 21, 2020.

 

 

Generally, we may not redeem the Series A Preferred Stock underlying the depositary shares until the fifth anniversary of the date of issuance, and except as described below upon the occurrence of a Delisting Event or Change of Control (each as defined herein), as applicable. On or after the fifth anniversary, we may, at our option, redeem the shares of the Series A Preferred Stock underlying the depositary shares, in whole or from time to time in part, by paying $25,000.00 per share ($25.00 per depositary share), plus any accumulated and unpaid dividends to, but not including, the redemption date. In addition, upon the occurrence of a Delisting Event or a Change of Control (each as defined herein), we may, subject to certain conditions, at our option, redeem the Series A Preferred Stock underlying the depositary shares, in whole or in part within 90 days after the first date on which such Delisting Event occurred or within 120 days after the first date on which such Change of Control occurred, as applicable, by paying $25,000.00 per share ($25.00 per depositary share), plus any accumulated and unpaid dividends to, but not including, the redemption date. If we exercise any of our redemption rights relating to the Series A Preferred Stock underlying the depositary shares, the holders of the depositary shares representing the Series A Preferred Stock will not have the conversion right described below.

Upon the occurrence of a Delisting Event or a Change of Control, as applicable, each holder of a depositary share of the underlying Series A Preferred Stock will have the right (unless, prior to the Delisting Event Conversion Date or Change of Control Conversion Date (each as defined herein), we have provided or provide notice of our election to redeem the Series A Preferred Stock) to direct the depositary, on such holder’s behalf, to convert some or all of the shares of Series A Preferred Stock underlying the depositary shares held by such holder on the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, into a number of shares of our common stock per depositary share equal to the lesser of:

 

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the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accumulated and unpaid dividends thereon to, but not including, the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable (unless the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, is after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accumulated and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (as defined herein); and

 

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5.52486 (i.e., the “Share Cap”), subject to certain adjustments;

subject, in each case, to the conditions described in this prospectus, including, under specified circumstances, an aggregate cap on the total number of shares of common stock issuable upon conversion and to provisions for the receipt of alternative consideration.

The Series A Preferred Stock underlying the depositary shares has no maturity date and will remain outstanding indefinitely unless redeemed by us or converted into shares of common stock in connection with a Delisting Event or Change of Control by the holders of the depositary shares representing the Series A Preferred Stock. Investors in the depositary shares generally will have no voting rights, but will have limited voting rights if we fail to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

We will apply to list the depositary shares on the New York Stock Exchange (NYSE) under the symbol “ALTG PR A.” If the application is approved, we expect trading on the NYSE will commence within 30 days after the initial delivery of the depositary shares to the underwriters.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), and are subject to reduced public company reporting requirements.

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS			1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE			1
TRADEMARKS, SERVICE MARKS AND TRADE NAMES			2
INDUSTRY AND MARKET DATA			2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			2
CERTAIN DEFINED TERMS			3
PROSPECTUS SUMMARY			5
THE OFFERING			7
RISK FACTORS			13
USE OF PROCEEDS			28
MARKET FOR OUR SECURITIES			28
THE BUSINESS COMBINATION			29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			33
BUSINESS			59
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			67
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			73
MANAGEMENT			86
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS			90
EXECUTIVE COMPENSATION			95
BENEFICIAL OWNERSHIP OF SECURITIES			98
DESCRIPTION OF CAPITAL STOCK AND SECURITIES OFFERED			100
BOOK ENTRY DELIVERY AND FORM			120
UNDERWRITING (Conflicts of Interest)			122
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS			125
LEGAL MATTERS			130
EXPERTS			130
WHERE YOU CAN FIND MORE INFORMATION			130

You should rely only on the information contained in this prospectus, any supplement to this prospectus or in any free writing prospectus, filed with the Securities and Exchange Commission. Neither we nor the underwriter have authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: neither we nor the underwriter, have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside the United States.

To the extent there is a conflict between the information contained in this prospectus, on the one hand, and the information contained in any document incorporated by reference filed with the Securities and Exchange Commission before the date of this prospectus, on the other hand, you should rely on the information in this prospectus. If any statement in a document incorporated by reference is inconsistent with a statement in another document incorporated by reference having a later date, the statement in the document having the later date modifies or supersedes the earlier statement.

 

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (“SEC”). We urge you to carefully read this prospectus and the documents incorporated by reference herein, before buying any of the securities being offered under this prospectus.

You should rely only on the information contained in this prospectus or incorporated by reference herein. Neither we nor the underwriters have authorized anyone to provide you with different information. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You should not rely on any unauthorized information or representation. This prospectus is an offer to sell only the securities offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus is accurate only as of the date on the front of the applicable document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the date of delivery of this prospectus or any sale of a security. Unless the context otherwise requires, the “Company” refers to the registrant and its subsidiaries, including Alta Holdings and its subsidiaries, after the Closing, and “BRPM” refers to the registrant prior the Closing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference the information we file with it, which means that we can disclose important information to you by referring you to another document that we have filed separately with the SEC. You should read the information incorporated by reference because it is an important part of this prospectus. We incorporate by reference into this prospectus and the registration statement of which this prospectus is a part the information and documents listed below that we have filed with the SEC (Commission File No. 0001759824):

 

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our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 25, 2020;

 

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our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 14, 2020;

 

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our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed with the SEC on August 13, 2020;

 

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our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 12, 2020;

 

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our Current Reports on Form 8-K filed with the SEC on March 25, 2020, March 31, 2020, May  14, 2020, August 13, 2020, August  21, 2020, September 10, 2020, October  15, 2020, November  2, 2020 and November 12, 2020.

We are not, however, incorporating by reference any documents or portions thereof, whether specifically listed above or filed in the future, that are furnished to, but not deemed “filed” with, the SEC, including any information furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K (or corresponding information furnished under Item 9.01 or included as an exhibit to Form 8-K).

Copies of all documents which are incorporated by reference in this prospectus (not including the exhibits to such information, unless such exhibits are specifically incorporated by reference) will be provided without charge to each person, including any beneficial owner of the securities offered by this prospectus, to whom this prospectus or the prospectus is delivered, upon written or oral request. Requests should be directed to Alta Equipment Group Inc., 3211 Merriman Road, Livonia, Michigan 48150, Attention: Investor Relations, Telephone: (248) 449-6700. You may also obtain copies of these filings, at no cost, by accessing our website at www.altaequipment.com however, the information on, or accessible through, our website is not incorporated into and does not constitute a part of this prospectus or any other report or document we file with or furnish to the SEC.

 

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TRADEMARKS, SERVICE MARKS AND TRADE NAMES

This prospectus contains some of our trademarks, service marks and trade names, including, among others, Alta. Each one of these trademarks, service marks or trade names is either (1) our registered trademark, (2) a trademark for which we have a pending application, or (3) a trade name or service mark for which we claim common law rights. All other trademarks, trade names or service marks of any other company appearing in this prospectus belong to their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are presented without the TM, SM and ^® symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our respective rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

INDUSTRY AND MARKET DATA

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications and other published independent sources. Although we believe these third-party sources are reliable as of their respective dates, neither we nor the underwriters have independently verified the accuracy or completeness of this information. Some data is also based on our good faith estimates. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements provide our current expectations or forecasts of future events. 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. Forward-looking statements in this prospectus include, but are not limited to, statements relating to the benefits of the business combination and our acquisitions; the future financial performance of the Company following the business combination; and changes in the Company’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on information available as of the date of this prospectus, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the parties’ views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to: (1) the outcome of any legal proceedings that may be instituted against the Company relating to the business combination and related transactions; (2) the ability to maintain the listing of the Company’s shares of common stock on the New York Stock Exchange following the business combination; (3) the ability to recognize the anticipated benefits of the business combination and our acquisitions, which may be affected by, among other things, competition, the ability of the Company business to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; (4) changes in applicable laws or regulations; (5) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and (6) other risks

 

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and uncertainties described in this prospectus under “Risk Factors” or new risk factors contained in our subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC.

CERTAIN DEFINED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “BRPM,” “Alta,” the “Company,” “we,” “us” or “our” refer to Alta Equipment Group Inc. and its subsidiaries unless the context requires otherwise.

In this prospectus, unless otherwise stated or unless the context otherwise requires:

“Audit Committee” means the audit committee of the Company’s board of directors.

“BRPM” means B. Riley Principal Merger Corp. prior to the consummation of the business combination.

“business combination” means the acquisitions and transactions contemplated by the Merger Agreement.

“Charter” means the third amended and restated certificate of incorporation of the Company.

“Closing” means the closing of the business combination.

“Code” means the Internal Revenue Code of 1986, as amended.

“common stock” means the common stock of the Company, par value $0.0001 per share.

“Compensation Committee” means the compensation committee of the Company’s board of directors.

“depositary shares” means 1/1000^th of a share of 10% Series A Preferred Stock.

“DGCL” means the General Corporation Law of the State of Delaware.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means United States generally accepted accounting principles, consistently applied, as in effect from time to time.

“Incentive Plan” means the Alta Equipment Group Inc. 2020 Omnibus Incentive Plan.

“IPO” or “initial public offering” means the Company’s initial public offering of units consummated on April 11, 2019.

“JOBS Act” means the Jumpstart Our Business Startups Act of 2012, as amended.

“LIBOR” means the London Interbank Offered Rate.

“NYSE” means The New York Stock Exchange.

“PIPE” means a private investment in a public entity.

“private placement” means the private sale of the private placement units simultaneously with the closing of the IPO.

 

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“private placement shares” means the shares of common stock in the private placement units issued in the private placement.

“private placement units” means the 462,500 units at $10.00 per private placement unit purchased by the Sponsor simultaneously with the closing of the IPO, each of which consists of one share of common stock and one-half of one private placement warrant.

“private placement warrants” means the warrants in the private placement units issued in the private placement.

“public stockholder” means a holder of Alta’s public shares.

“public warrants” means the 7,187,500 redeemable warrants sold as part of the units in the IPO.

“Rule 144” means Rule 144 under the Securities Act.

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Series A Preferred Stock” means 10% Series A Cumulative Perpetual Preferred Stock of the Company, par value $0.0001 per share.

“special meeting” means the special meeting in lieu of the 2020 annual meeting of stockholders of BRPM.

“Sponsor” means the Company’s former sponsor, B. Riley Principal Sponsor Co., LLC.

“transfer agent” means Continental Stock Transfer & Trust Company.

“trust account” means the trust account established in connection with the IPO.

“units” means the units of the Company, each consisting of one share of common stock and one-half of one redeemable warrant of the Company, with each such public warrant entitling the holder thereof to purchase one share of common stock at a price of $11.50 per share.

“warrants” means the private placement warrants and public warrants.

 

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this prospectus, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

Risks Related to this Offering

There is no established market for the depositary shares and the market value of the depositary shares could be substantially affected by various factors.

The depositary shares are a new issue of securities with no established trading market. We intend to apply to list the depositary shares on the NYSE. Our listing application may not be approved by the NYSE. Further, even if approved for listing by the NYSE, an active trading market on the NYSE for the depositary shares may not develop or last, in which case the trading price of the depositary shares could be adversely affected. If an active trading market does develop on the NYSE, the depositary shares may trade at prices higher or lower than their initial offering price.

The trading price of the depositary shares would also depend on many factors, including:

 

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prevailing interest rates;

 

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the market for similar securities;

 

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the number of holders of the depositary shares;

 

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general economic and financial market conditions;

 

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our financial condition, results of operations and prospects; and

 

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the matters discussed in this prospectus under the captions “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 under the caption “Risk Factors.”

We have been advised by some of the underwriters that they intend to make a market in the depositary shares, but they are not obligated to do so and may discontinue market-making at any time without notice.

The Series A Preferred Stock and the depositary shares rank junior to all of our indebtedness and other liabilities and are effectively junior to all indebtedness and other liabilities of our subsidiaries.

In the event of our bankruptcy, liquidation, dissolution or winding-up of our affairs, our assets will be available to pay obligations on the Series A Preferred Stock only after all of our indebtedness and other liabilities have been paid. The rights of holders of the Series A Preferred Stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue that ranks senior to the Series A Preferred Stock. In addition, the Series A Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries. Our existing subsidiaries are and any future subsidiaries would be separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Series A Preferred Stock. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due on any or all of the Series A Preferred Stock then outstanding. We and our subsidiaries have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Series A Preferred Stock. We may incur additional indebtedness and become more highly leveraged in the future, which could harm our financial position and potentially limit our cash available to pay dividends. As a result, we may not have sufficient funds remaining to satisfy our dividend obligations relating to our Series A Preferred Stock if we incur additional indebtedness. In addition, our existing credit arrangements include events of default which could result in acceleration of such indebtedness upon the occurrence of certain events, including failure to meet certain financial covenants.

 

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Future offerings of debt or senior equity securities may adversely affect the market price of the depositary shares. If we decide to issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Series A Preferred Stock and may result in dilution to owners of the depositary shares. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus holders of the depositary shares will bear the risk of our future offerings reducing the market price of the depositary shares and diluting the value of their holdings in us.

We may not be able to pay dividends on the Series A Preferred Stock if we have insufficient cash or available ‘surplus’ as defined under Delaware law to make such dividend payments.

Our ability to pay cash dividends on the Series A Preferred Stock requires us to have either net profits or positive net assets (total assets less total liabilities) over our capital, and that we have sufficient working capital in order to be able to pay our debts as they become due in the usual course of business. Our ability to pay dividends may also be impaired if any of the risks described in this prospectus, including the documents incorporated by reference herein, were to occur. Also, payment of our dividends depends upon our financial condition and other factors as our board of directors may deem relevant from time to time. We cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock, if any, and preferred stock, including the Series A Preferred Stock to pay our indebtedness or to fund our other liquidity needs.

We may issue additional shares of the Series A Preferred Stock and additional series of preferred stock that rank on a parity with the Series A Preferred Stock as to dividend rights, rights upon liquidation or voting rights.

We are allowed to issue additional shares of Series A Preferred Stock and additional series of preferred stock that would rank on a parity with the Series A Preferred Stock as to dividend payments and rights upon our liquidation, dissolution or winding up of our affairs pursuant to our articles of incorporation and the certificate of designation for the Series A Preferred Stock without any vote of the holders of the Series A Preferred Stock. Our certificate of incorporation authorize us to issue up to 1,000,000 shares of preferred stock in one or more series on terms determined by our Board of Directors. Prior to this offering, we have no outstanding series of preferred stock. However, the use of depositary shares enables us to issue significant amounts of preferred stock, notwithstanding the number of shares authorized by our certificate of incorporation. The issuance of additional shares of Series A Preferred Stock and additional series of parity preferred stock could have the effect of reducing the amounts available to the Series A Preferred Stock issued in this offering upon our liquidation or dissolution or the winding up of our affairs. It also may reduce dividend payments on the Series A Preferred Stock issued in this offering if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and other classes of stock with equal priority with respect to dividends.

In addition, although holders of the depositary shares are entitled to limited voting rights, as described in “Description of Capital Stock and Securities Offered — Limited Voting Rights,” with respect to such matters, the holders of the depositary shares will vote separately as a class along with all other outstanding series of our preferred stock that we may issue upon which like voting rights have been conferred and are exercisable. As a result, the voting rights of holders of the depositary shares may be significantly diluted, and the holders of such other series of preferred stock that we may issue may be able to control or significantly influence the outcome of any vote.

Future issuances and sales of parity preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the depositary shares and our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us. Such issuances may also reduce or eliminate our ability to pay dividends on our common stock.

 

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As a holder of depositary shares representing interests in the Series A Preferred Stock, you will have extremely limited voting rights.

Your voting rights as a holder of depositary shares will be limited. Our common stock is the only class of our securities that carries full voting rights. Voting rights for holders of depositary shares will exist primarily with respect to the ability to elect (together with the holders of other outstanding series of our preferred stock, or depositary shares representing interests in our preferred stock, or additional series of preferred stock we may issue in the future and upon which similar voting rights have been or are in the future conferred and are exercisable) two additional directors to our Board of Directors in the event that six quarterly dividends (whether or not declared or consecutive) payable on the Series A Preferred Stock are in arrears, and with respect to voting on amendments to our articles of incorporation or certificate of designation (in some cases voting together with the holders of other outstanding series of our preferred stock as a single class) that materially and adversely affect the rights of the holders of depositary shares representing interests in the Series A Preferred Stock (and other series of preferred stock, as applicable) or create additional classes or series of our stock that are senior to the Series A Preferred Stock, provided that in any event adequate provision for redemption has not been made. Other than the limited circumstances described in this prospectus, holders of depositary shares will not have any voting rights. See “Description of Capital Stock and Securities Offered — Limited Voting Rights.”

The depositary shares have not been rated.

The Series A Preferred Stock and the depositary shares have not been rated and may never be rated. It is possible, however, that one or more rating agencies might independently decide to assign a rating to the depositary shares or that we may elect to obtain a rating of the depositary shares in the future. Furthermore, we may elect to issue other securities for which we may seek to obtain a rating. If any ratings are assigned to the depositary shares in the future or if we issue other securities with a rating, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn, could adversely affect the market for, or the market value of, the depositary shares.

Ratings reflect the views of the issuing rating agency or agencies, and such ratings could at any time be revised downward, placed on negative outlook or withdrawn entirely at the discretion of the issuing rating agency or agencies. Furthermore, a rating is not a recommendation to purchase, sell or hold any particular security, including the depositary shares. Ratings do not reflect market prices or the suitability of a security for a particular investor, and any future rating of the depositary shares may not reflect all risks related to us and our business, or the structure or market value of the depositary shares.

The conversion feature may not adequately compensate you, and the conversion and redemption features of the Series A Preferred Stock and the depositary shares may make it more difficult for a party to take over our company and may discourage a party from taking over our company.

Upon the occurrence of a Delisting Event or Change of Control, holders of the depositary shares representing interests in the Series A Preferred Stock will have the right (unless, prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, we have provided or provide notice of our election to redeem the Series A Preferred Stock) to direct the depositary to convert some or all of the Series A Preferred Stock underlying their depositary shares into our common stock (or equivalent value of alternative consideration), and under these circumstances we will also have a special optional redemption right to redeem the Series A Preferred Stock. See “Description of Capital Stock and Securities Offered — Conversion Rights” and “— Special Optional Redemption.” Upon such a conversion, the holders will be limited to a maximum number of shares of our common stock equal to the Share Cap multiplied by the number of shares of Series A Preferred Stock converted. If the Common Stock Price is less than $4.525 (which is approximately 50% of the closing sale price per share of our common stock on December 16, 2020), subject to adjustment, the holders will receive a maximum of shares of our common stock per depositary share, which may result in a holder receiving value that is less than the liquidation preference of the depositary shares. In addition, those features of the Series

 

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A Preferred Stock and depositary shares may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring or preventing a change of control of our company under circumstances that otherwise could provide the holders of our common stock and depositary shares representing interests in the Series A Preferred Stock with the opportunity to realize a premium over the then-current market price or that shareholders may otherwise believe is in their best interests.

The market price of the depositary shares could be substantially affected by various factors.

The market price of the depositary shares will depend on many factors, which may change from time to time, including:

 

•

sales or potential sales of substantial amounts of our depositary shares;

 

•

developments concerning our largest customers, any or all of which could effectively terminate our services at any time;

 

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developments concerning our major OEM suppliers;

 

•

governmental regulation and legislation;

 

•

variations in our anticipated or actual operating results;

 

•

prevailing interest rates, increases in which may have an adverse effect on the market price of the depositary shares;

 

•

trading prices of similar securities;

 

•

our history of timely distribution payments on the depositary shares;

 

•

the annual yield from distributions on the depositary shares as compared to yields on other financial instruments;

 

•

general economic and financial market conditions;

 

•

government action or regulation;

 

•

the financial condition, performance and prospects of us and our competitors;

 

•

changes in financial estimates or recommendations by securities analysts with respect to us, our competitors or our industry;

 

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our issuance of additional preferred equity or debt securities; and

 

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actual or anticipated variations in quarterly operating results of us and our competitors; and

 

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the ongoing impact of the global COVID-19 pandemic.

As a result of these and other factors, investors who purchase the depositary shares in this offering may experience a decrease, which could be substantial and rapid, in the market price of the depositary shares, including decreases unrelated to our operating performance or prospects.

We have broad discretion in the use of the net proceeds of this offering and may not use them effectively.

We intend to use the net proceeds from this offering for general corporate purposes, including including funding future acquisitions and investments, repaying indebtedness, capital expenditures and funding working capital. However, our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our common stock to decline.

 

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Market interest rates may materially and adversely affect the value of the Series A Preferred Stock.

One of the factors that influences the price of the Series A Preferred Stock is the dividend yield on the Series A Preferred Stock (as a percentage of the market price of the Series A Preferred Stock) relative to market interest rates. Continued increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of the Series A Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease.

Holders of Series A Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income.”

Distributions paid to corporate U.S. holders (as defined below in the “Material U.S. Federal Income Tax Consequences” section) on the Series A Preferred Stock may be eligible for the dividends-received deduction, and distributions paid to non-corporate U.S. holders on the Series A Preferred Stock may be subject to tax at the preferential tax rates applicable to “qualified dividend income,” if we have current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Although we presently have accumulated earnings and profits, we may not have sufficient current or accumulated earnings and profits during future fiscal years for the distributions on the Series A Preferred Stock to qualify as dividends for U.S. federal income tax purposes. If any distributions on the Series A Preferred Stock with respect to any fiscal year fail to be treated as dividends for U.S. federal income tax purposes, corporate U.S. holders would be unable to use the dividends-received deduction and non-corporate U.S. holders may not be eligible for the preferential tax rates applicable to “qualified dividend income” and generally would be required to reduce their tax basis in the Series A Preferred Stock by the extent to which the distribution is not treated as a dividend. See the “Material U.S. Federal Income Tax Consequences” section for additional information.

You may be subject to tax if we make or fail to make certain adjustments to the Conversion Rate of the Series A Preferred Stock even though you do not receive a corresponding cash dividend.

The Conversion Rate (as defined in “Description of Capital Stock and Securities Offered — Conversion Rights”) for the Series A Preferred Stock is subject to adjustment in certain circumstances. A failure to adjust (or to adjust adequately) the Conversion Rate after an event that increases your proportionate interest in us could be treated as a deemed taxable dividend to you. If you are a non-U.S. holder (as defined in “Material U.S. Federal Income Tax Considerations”), any deemed dividend may be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty, which may be set off against subsequent payments on the Series A Preferred Stock. In April 2016, the Internal Revenue Service issued new proposed income tax regulations in regard to the taxability of changes in conversion rights that will apply to the Series A Preferred Stock when published in final form and may be applied to us before final publication in certain instances. See “Material U.S. Federal Income Tax Considerations.”

Our revenues, operating results and cash flows may fluctuate in future periods, and we may fail to meet investor expectations, which may cause the price of our Series A Preferred Stock to decline.

Variations in our quarterly and year-end operating results are difficult to predict, and our income and cash flows may fluctuate significantly from period to period. If our operating results fall below the expectations of investors or securities analysts, the price of our Series A Preferred Stock could decline substantially. Specific factors that may cause fluctuations in our operating results include:

The Series A Preferred Stock represents perpetual equity interests in us, and it has no maturity or mandatory redemption date and are not redeemable at the option of investors under any circumstances. As a result, the Series A Preferred Stock will not give rise to a claim for payment of a principal amount at a particular date. As a

 

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result, holders of the Series A Preferred Stock may be required to bear the financial risks of an investment in the Series A Preferred Stock for an indefinite period of time. In addition, the Series A Preferred Stock will rank junior to all our current and future indebtedness and other liabilities. The Series A Preferred Stock will also rank junior to any other senior securities we may issue in the future with respect to assets available to satisfy claims against us.

Risks Relating to the Company’s Business and Industry

The Company’s business could be adversely affected by declines in construction and industrial activities, or a downturn in the economy in general, which could lead to decreased demand for equipment, depressed equipment rental rates and lower sales prices, resulting in a decline in the Company’s revenues, gross margins and operating results.

The Company’s equipment is principally used in connection with construction and industrial activities. Consequently, a downturn in construction or industrial activities, or the economy in general, may lead to a decrease in the demand for equipment or depress rental rates and the sales prices for the Company’s equipment. the Company’s business may also be negatively impacted, either temporarily or long-term, by:

 

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a reduction in spending levels by customers;

 

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unfavorable credit markets affecting end-user access to capital;

 

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adverse changes in federal, state and local government infrastructure spending;

 

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an increase in the cost of construction materials;

 

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adverse weather conditions or natural disasters which may affect a particular region;

 

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a prolonged shutdown of the U.S. government;

 

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an increase in interest rates;

 

•

terrorism or hostilities involving the United States; or

 

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the ongoing impact of the global COVID-19 pandemic.

Unfavorable conditions or disruptions in the capital and credit markets may adversely impact business conditions and the availability of credit.

Disruptions in the global capital and credit markets as a result of an economic downturn, economic uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect the Company’s customers’ ability to access capital and could adversely affect the Company’s access to liquidity needed for business in the future. Additionally, unfavorable market conditions may depress demand for the Company’s products and services or make it difficult for the Company’s customers to obtain financing and credit on reasonable terms. Unfavorable market conditions also may cause more of the Company’s customers to be unable to meet their payment obligations to the Company, increasing delinquencies and credit losses. If the Company is unable to manage credit risk or customer risk adequately, the Company’s credit losses could increase above historical levels and the Company’s operating results would be adversely affected. the Company’s suppliers may also be adversely impacted by unfavorable capital and credit markets, causing disruption or delay of product availability. These events could negatively impact the Company’s business, financial position, results of operations and cash flows.

 

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The Company’s inability to forecast trends accurately may adversely impact the Company’s business and financial condition.

An economic downturn or economic uncertainty makes it difficult for the Company to forecast trends, which may have an adverse impact on the Company’s business and financial condition. Uncertainty regarding future equipment product demand could cause the Company to maintain excess equipment inventory and increase the Company’s equipment inventory carrying costs. Alternatively, this forecasting difficulty could cause a shortage of equipment for sale or rental that could result in an inability to satisfy demand for the Company’s products and a loss of market shares.

The Company’s substantial indebtedness could adversely affect the Company’s financial condition.

The Company has, and will continue to have, a significant amount of indebtedness outstanding. The Company’s indebtedness may result in important consequences, such as:

 

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increasing the Company’s vulnerability to general adverse economic, industry and competitive conditions;

 

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requiring the Company to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, thereby reducing the availability of its cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

 

•

limiting the Company’s flexibility in planning for, or reacting to, changes in the Company’s business and the industry in which it operates;

 

•

placing the Company at a competitive disadvantage compared to its competitors that have less debt; and

 

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limiting the Company’s ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes.

The Company expects to use cash flow from operations and borrowings under its credit facilities to meet its current and future financial obligations, including funding its operations, debt service and capital expenditures. The Company’s ability to make these payments depends on the Company’s future performance, which will be affected by financial, business, economic and other factors, many of which the Company cannot control. The Company’s business may not generate sufficient cash flow from operations in the future, which could result in the Company’s being unable to repay indebtedness, or to fund other liquidity needs. If the Company does not have enough capital, it may be forced to reduce or delay its business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of its debt. The Company cannot make any assurances that it will be able to accomplish any of these alternatives on terms acceptable to it, or at all. In addition, the Company’s current and future credit arrangements may limit the Company’s ability to pursue any of these alternatives.

The Company may not be able to generate sufficient cash to service all of the Company’s indebtedness and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful.

The Company’s ability to make scheduled debt payments depends on its financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond the Company’s control. The Company cannot make assurances that we will maintain a level of cash flows from operating activities sufficient to permit it to pay scheduled payments of principal and interest on the Company’s indebtedness. In the absence of adequate operating performance, the Company could face substantial liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations. The Company may not be able to consummate those dispositions, and any proceeds it does receive from a disposition may not be adequate to meet any debt service obligations then due.

 

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If the Company’s cash flows and capital resources are insufficient to fund its debt service obligations, the Company may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance its indebtedness.

The agreements governing credit facilities restrict the Company’s business and its ability to engage in certain corporate and financial transactions.

The agreements governing the credit facilities contain certain covenants that, among other things, restrict or limit the Company’s and its restricted subsidiaries’ ability to:

 

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incur more debt;

 

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pay dividends, including dividends on the Series A Preferred Stock, and make distributions;

 

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make investments;

 

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repurchase stock;

 

•

create liens;

 

•

enter into transactions with affiliates;

 

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enter into sale and lease-back transactions;

 

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merge or consolidate; and

 

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transfer and sell assets.

Events beyond the Company’s control can affect its ability to meet these financial conditions tests and to comply with other provisions governing the Company’s credit facilities. The Company’s failure to comply with obligations under the agreements may result in an event of default. A default, if not cured or waived, may permit acceleration of this indebtedness and the Company’s other indebtedness. The Company may not be able to remedy these defaults. If the Company’s indebtedness is accelerated, it may not have sufficient funds available to pay the accelerated indebtedness and may not have the ability to refinance the accelerated indebtedness on terms favorable to the Company or at all.

The Company’s business could be hurt if it is unable to obtain additional capital as required, resulting in a decrease in the Company’s revenues and profitability. In addition, the Company’s inability to refinance its indebtedness on favorable terms, or at all, could materially and adversely affect the Company’s liquidity and its ongoing results of operations.

The cash that the Company generates from its business, together with cash that it may borrow, if credit is available, may not be sufficient to fund the Company’s capital requirements. The Company may require additional financing to obtain capital for, among other purposes, purchasing equipment, completing acquisitions, establishing new locations and refinancing existing indebtedness. Any additional indebtedness that the Company incurs will make it more vulnerable to economic downturns and limit the Company’s ability to withstand competitive pressures. Moreover, the Company may not be able to obtain additional capital on acceptable terms, if at all. If it is unable to obtain sufficient additional financing in the future, the Company’s business could be adversely affected by reducing its ability to increase revenues and profitability.

In addition, the Company’s ability to refinance indebtedness will depend in part on the Company’s operating and financial performance, which, in turn, is subject to prevailing economic conditions and to financial, business, legislative, regulatory and other factors beyond the Company’s control. In addition, prevailing interest rates or other factors at the time of refinancing could increase the Company’s interest expense. A refinancing of the Company’s indebtedness could also require it to comply with more onerous covenants and further restrict the Company’s business operations. the Company’s inability to refinance the Company’s indebtedness or to do so

 

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upon attractive terms could materially and adversely affect the Company’s business, prospects, results of operations, financial condition and cash flows, and make it vulnerable to adverse industry and general economic conditions.

The Company’s revenue and operating results may fluctuate, which could result in a decline in the Company’s profitability and make it more difficult for the Company to grow its business.

The Company’s revenue and operating results may vary from quarter to quarter any by season. Periods of decline could result in an overall decline in profitability and make it more difficult for the Company to make payments on its indebtedness and grow the Company’s business. We expect the Company’s quarterly results to fluctuate in the future due to a number of factors, including:

 

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general economic conditions in the markets where we operate;

 

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the cyclical nature of the Company’s customers’ business, particularly the Company’s construction customers;

 

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seasonal sales and rental patterns of the Company’s construction customers;

 

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changes in the size of the Company’s rental fleet and/or in the rate at which it sells its used equipment from the fleet;

 

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changes in corporate spending or changes in government spending for infrastructure projects;

 

•

changes in interest rates and related changes in the Company’s interest expense and the Company’s debt service obligations;

 

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the effectiveness of integrating acquired businesses and new start-up locations; and

 

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timing of acquisitions and new location openings and related costs.

In addition, the Company incurs various costs when integrating newly acquired businesses or opening new start-up locations, and the profitability of a new location is generally expected to be lower in the initial months of operation.

The Company may not be able to identify or complete transactions with attractive acquisition candidates. Future acquisitions may result in significant transaction expenses and the Company may involve significant costs. The Company may experience integration and consolidation risks associated with future acquisitions.

An important element of the Company’s growth strategy is to selectively pursue on an opportunistic basis acquisitions of additional businesses, in particular rental companies that complement the Company’s existing business and footprint. The success of this element of the Company’s growth strategy depends, in part, on selecting strategic acquisition candidates at attractive prices and effectively integrating their businesses into the Company’s own, including with respect to financial reporting and regulatory matters. The Company cannot assure you that it will be able to identify attractive acquisition candidates or complete the acquisition of any identified candidates at favorable prices and upon advantageous terms and conditions, including financing alternatives.

The Company may not have sufficient management, financial and other resources to integrate and consolidate any future acquisitions. Any significant diversion of management’s attention or any major difficulties encountered in the integration of the businesses the Company acquire could have a material adverse effect on the Company’s business, financial condition or results of operations, which could decrease the Company’s profitability and make it more difficult for the Company to grow its business. Among other things, these integration risks could include:

 

•

the loss of key employees;

 

•

the disruption of operations and business;

 

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the retention of the existing clients and the retention or transition of customers and vendors;

 

•

the integration of corporate cultures and maintenance of employee morale;

 

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inability to maintain and increase competitive presence;

 

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customer loss and revenue loss;

 

•

possible inconsistencies in standards, control procedures and policies;

 

•

problems with the assimilation of new operations, sites or personnel, which could divert resources from the Company’s regular operations;

 

•

integration of financial reporting and regulatory reporting functions; and/or

 

•

potential unknown liabilities.

In addition, general economic conditions or unfavorable capital and credit markets could affect the timing and extent to which the Company can successfully acquire or integrate new businesses, which could limit the Company’s revenues and profitability.

The Company is subject to competition, which may have a material adverse effect on the Company’s business by reducing the Company’s ability to increase or maintain revenues or profitability.

The equipment rental and retail distribution industries are highly competitive and the equipment rental industry is highly fragmented. Many of the markets in which the Company operates are served by a large number of competitors, ranging from national and multi-regional equipment rental companies to small, independent businesses with a limited number of locations. Some of the Company’s competitors have significantly greater financial, marketing and other resources than the Company does, and may be able to reduce rental rates or sales prices. The Company may encounter increased competition from existing competitors or new market entrants in the future, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may not be able to facilitate its growth strategy by identifying and opening start-up locations, which could limit the Company’s revenues and profitability.

An element of the Company’s growth strategy is to selectively identify and implement start-up locations in order to add new customers. The success of this element of the Company’s growth strategy depends, in part, on identifying strategic start-up locations. The Company cannot be sure that it will be able to identify attractive start-up locations, and opening start-up locations may involve significant costs and limit the Company’s ability to expand its operations.

The Company may not have sufficient management, financial and other resources to successfully operate new locations. Any significant diversion of management’s attention or any major difficulties encountered in the locations that the Company opens in the future could have a material adverse effect on the Company’s business, financial condition or results of operations, which could decrease the Company’s profitability and make it more difficult for the Company to grow its business.

The Company purchases a significant amount of its equipment from a limited number of manufacturers. Termination of one or more of the Company’s relationships with any of those manufacturers could have a material adverse effect on the Company’s business, as it may be unable to obtain adequate or timely rental and sales equipment.

The Company purchases most of its rental and sales equipment from leading, nationally-known original equipment manufacturers. Approximately 58% of the Company’s rental and sales equipment is purchased from four major manufacturers (Yale, Hyster, Volvo, and JCB). Although the Company believes that it has alternative

 

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sources of supply for the rental and sales equipment it purchases in each of its core product categories, termination of one or more of the Company’s relationships with any of these major suppliers could have a material adverse effect on the Company’s business, financial condition or results of operations if it were unable to obtain adequate or timely rental and sales equipment.

The Company’s suppliers of new equipment may appoint additional distributors, sell directly or unilaterally terminate the Company’s distribution agreements, which could have a material adverse effect on the Company’s business due to a reduction of, or inability to increase, the Company’s revenues.

The Company is a distributor of new equipment and parts supplied by leading, nationally-known suppliers. Under the Company’s distribution agreements with these suppliers, manufacturers generally retain the right to appoint additional dealers and sell directly to national accounts and government agencies. The Company has distribution agreements with the Company’s equipment suppliers, it operates under the Company’s established course of dealing with the suppliers and is subject to applicable state laws regarding such relationships. In most instances, the suppliers may appoint additional distributors, elect to sell to customers directly or unilaterally terminate distribution agreements with the Company at any time without cause. Any such actions could have a material adverse effect on the Company’s business, financial condition and results of operations due to a reduction of, or an inability to increase, the Company’s revenues.

The cost of new equipment that the Company sells or purchases for use in its rental fleet may increase and in some cases, the Company may not be able to procure new equipment on a timely basis due to supplier constraints.

The cost of new equipment from manufacturers that the Company sells or purchases for use in its rental fleet may increase as a result of increased raw material costs, including increases in the cost of steel, which is a primary material used in most of the equipment the Company uses, or due to increased regulatory requirements, such as those related to emissions. These increases could materially impact the Company’s financial condition or results of operations in future periods if the Company is not able to pass such cost increases through to the Company’s customers.

The Company’s rental fleet is subject to residual value risk upon disposition.

The market value of any given piece of rental equipment could be less than its depreciated value at the time it is sold. The market value of used rental equipment depends on several factors, including: the market price for new equipment of a like kind; wear and tear on the equipment relative to its age; worldwide and domestic demands for used equipment; the supply of used equipment on the market; and general economic conditions.

Any significant decline in the selling prices for used equipment could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

The Company incurs maintenance and repair costs associated with its rental fleet equipment that could have a material adverse effect on its business in the event these costs are greater than anticipated.

As the Company’s fleet of rental equipment ages, the cost of maintaining such equipment, if not replaced within a certain period of time, generally increases. Determining the optimal age for the Company’s rental fleet equipment is based on subjective estimates made by the Company’s management team. The Company’s future operating results could be adversely affected because the Company’s maintenance and repair costs may be higher than estimated and market values of used equipment may fluctuate.

 

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Security breaches and other disruptions in the Company’s information technology systems, including the Company’s customer relationship management system, could limit the Company’s capacity to effectively monitor and control its operations, compromise its or its customers’ and suppliers’ confidential information or otherwise adversely affect the Company’s operating results or business reputation.

The Company’s information technology systems, some of which are managed by third parties, facilitate the Company’s ability to monitor and control the Company’s operations and adjust to changing market conditions, including processing, transmitting, storing, managing and supporting a variety of business processes, activities and information. Further, as the Company pursues its growth strategy it is also expanding and improving its information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. Any disruption in any of these systems, including the Company’s customer management system, or the failure of any of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect the Company’s operating results by limiting the Company’s capacity to effectively monitor and control the Company’s operations and adjust to changing market conditions.

The Company collects and stores sensitive data, including proprietary business information and the proprietary business information of the Company’s customers and suppliers, in data centers and on information technology networks, including cloud-based networks. The secure operation of these information technology networks and the processing and maintenance of this information is critical to the Company’s business operations and strategy. Despite security measures and business continuity plans, the Company’s information technology networks and infrastructure may be vulnerable to damage, disruptions or shutdowns due to attacks by cyber criminals or breaches due to employee error or malfeasance or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures, terrorist acts or natural disasters or other catastrophic events. The growing use and rapid evolution of technology, including mobile devices, has heightened the risk of unintentional data breaches or leaks. The occurrence of any of these events could compromise the Company’s networks, and the information stored there could be accessed, publicly disclosed, lost or stolen. In addition, the Company may need to invest additional resources to protect the security of the Company’s systems or to comply with evolving privacy, data security, cybersecurity and data protection laws applicable to the Company’s business.

Any failure to effectively prevent, detect and/or recover from any such access, disclosure or other loss of information, or to comply with any such current or future law related thereto, could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations, and damage the Company’s reputation, which could adversely affect the Company’s business.

Fluctuations in fuel costs or reduced supplies of fuel could harm the Company’s business.

The Company could be adversely affected by limitations on fuel supplies or significant increases in fuel prices that result in higher costs to the Company for transporting equipment from one branch to another branch or one region to another region. A significant or protracted disruption of fuel supplies could have an adverse effect on the Company’s financial condition and results of operations.

The Company is dependent on key personnel. A loss of key personnel could have a material adverse effect on the Company’s business, which could result in a decline in the Company’s revenues and profitability.

The Company’s success is dependent, in part, on the experience and skills of the Company’s management team. Competition for top management talent within the Company’s industry is generally significant. If the Company is unable to fill and keep filled all of the Company’s senior management positions, or if the Company loses the services of any key member of the Company’s senior management team and is unable to find a suitable replacement in a timely manner, the Company may be challenged to effectively manage its business and execute its strategy.

 

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If the Company fails to maintain an effective system of internal controls, the Company may not be able to accurately report financial results or prevent fraud.

Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm the Company’s business. If the Company fails to maintain the adequacy of its internal controls, as such standards are modified, supplemented or amended from time to time, the Company could be subject to regulatory scrutiny, civil or criminal penalties or stockholder litigation.

In addition, failure to maintain effective internal controls could result in financial statements that do not accurately reflect the Company’s financial condition or results of operations. There can be no assurance that the Company will be able to maintain a system of internal controls that fully complies with the requirements of the Sarbanes-Oxley Act or that the Company’s management and independent registered public accounting firm will continue to conclude that the Company’s internal controls are effective.

The Company is exposed to various risks related to legal proceedings or claims that could adversely affect the Company’s operating results. The nature of the Company’s business exposes it to various liability claims, which may exceed the level of the Company’s insurance coverage resulting in the Company not being fully protected.

The Company is a party to lawsuits in the normal course of the Company’s business. Litigation in general can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Responding to lawsuits brought against the Company, or legal actions that the Company may initiate, can often be expensive and time-consuming. Unfavorable outcomes from these claims and/or lawsuits could adversely affect the Company’s business, results of operations, or financial condition, and the Company could incur substantial monetary liability and/or be required to change its business practices.

The Company’s business exposes it to claims for personal injury, death or property damage resulting from the use of the equipment it rents or sells and from injuries caused in motor vehicle accidents in which the Company’s delivery and service personnel are involved and other employee related matters. Additionally, the Company could be subject to potential litigation associated with compliance with various laws and governmental regulations at the federal, state or local levels, such as those relating to the protection of persons with disabilities, employment, health, safety, security and other regulations under which the Company operates.

The Company carries comprehensive insurance, subject to deductibles, at levels it believes are sufficient to cover existing and future claims made during the respective policy periods. However, the Company may be exposed to multiple claims, and, as a result, could incur significant out-of-pocket costs before reaching the deductible amount which could adversely affect the Company’s financial condition and results of operations. In addition, the cost of such insurance policies may increase significantly upon renewal of those policies as a result of general rate increases for the type of insurance the Company carries as well as the Company’s historical experience and experience in the Company’s industry. Although the Company has not experienced any material losses that were not covered by insurance, the Company’s existing or future claims may exceed the coverage level of the Company’s insurance, and such insurance may not continue to be available on economically reasonable terms, or at all. If the Company is required to pay significantly higher premiums for insurance, is not able to maintain insurance coverage at affordable rates or if it must pay amounts in excess of claims covered by the Company’s insurance, the Company could experience higher costs that could adversely affect the Company’s financial condition and results of operations.

Labor disputes could disrupt the Company’s ability to serve its customers and/or lead to higher labor costs.

The Company has approximately 363 employees who are covered by a collective bargaining agreement and approximately 1,566 employees who are not represented by unions or covered by collective bargaining agreements. Various unions periodically seek to organize certain of the Company’s nonunion employees. Union

 

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organizing efforts or collective bargaining negotiations could potentially lead to work stoppages and/or slowdowns or strikes by certain of the Company’s employees, which could adversely affect the Company’s ability to serve its customers. Further, settlement of actual or threatened labor disputes or an increase in the number of the Company’s employees covered by collective bargaining agreements can have unknown effects on the Company’s labor costs, productivity and flexibility.

The Company has operations throughout the United States, which exposes it to multiple federal, state and local regulations. Changes in applicable law, regulations or requirements, or the Company’s material failure to comply with any of them, can increase the Company’s costs and have other negative impacts on the Company’s business.

The Company’s 51 branch locations in the United States are located in 11 different states, which exposes it to different federal, state and local regulations. These laws and requirements address multiple aspects of the Company’s operations, such as worker safety, consumer rights, privacy, employee benefits and more, and can often have different requirements in different jurisdictions. Changes in these requirements, or any material failure by the Company’s branches to comply with them, could increase the Company’s costs, affect its reputation, limit its business, drain management’s time and attention or otherwise, generally impact its operations in adverse ways.

The Company could be adversely affected by environmental and safety requirements, which could force it to increase significant capital and other operational costs and may subject it to unanticipated liabilities.

The Company’s operations, like those of other companies engaged in similar businesses, require the handling, use, storage and disposal of certain regulated materials. As a result, the Company is subject to the requirements of federal, state and local environmental and occupational health and safety laws and regulations. The Company is subject to potentially significant civil or criminal fines or penalties if it fails to comply with any of these requirements. The Company has made and will continue to make capital and other expenditures in order to comply with these laws and regulations, but the requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future. It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on the Company’s business, financial condition and results of operations.

Environmental laws also impose obligations and liability for the cleanup of properties affected by hazardous substance spills or releases. These liabilities can be imposed on the parties generating or disposing of such substances or the operator of the affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances. Accordingly, the Company may become liable, either contractually or by operation of law, for remediation costs even if a contaminated property is not currently owned or operated by the Company, or if the contamination was caused by third parties during or prior to the Company’s ownership or operation of the property. Given the nature of the Company’s operations (which involve the use of petroleum products, solvents and other hazardous substances for fueling and maintaining the Company’s equipment and vehicles), there can be no assurance that prior site assessments or investigations have identified all potential instances of soil or groundwater contamination. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to additional remediation liabilities, which may be material.

Changes in U.S. trade policies could significantly reduce the volume of imported goods into the United States, which may materially reduce truck freight volume in the United States and the Company’s sales.

The current presidential administration and members of the U.S. Congress have made public statements indicating possible significant changes in U.S. trade policy and have taken certain actions that may impact U.S. trade, including imposing tariffs on certain goods imported into the United States. Any changes in U.S. trade policy could trigger retaliatory actions by affected countries, resulting in “trade wars,” in increased costs for goods imported into the United States, which may reduce customer demand for these products if the parties

 

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having to pay those tariffs increase their prices, or in trading partners limiting their trade with the United States. If these consequences are realized, the volume of economic activity in the United States, including trucking freight volume, may be materially reduced. Such a reduction may materially and adversely affect the Company’s sales and the Company’s business. Further, the realization of these matters may increase the Company’s cost of goods and, if those costs cannot be passed on to the Company’s customers, the Company’s business and profits may be materially and adversely affected.

The impact of the COVID-19 outbreak, or similar global health concerns, could negatively impact our operations, supply chain and customer base.

The Company’s financial condition and results of operations has been adversely affected and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19. We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the global outbreak of COVID-19.

The impact of the COVID-19 pandemic has created significant volatility in the global economy and led to reduced economic activity. On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. Subsequent to this characterization international, federal, state, and local public health and governmental authorities have taken extraordinary measures to contain and combat the outbreak and spread of COVID-19. These actions include travel restrictions, local quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to drastically reduce or cease customary operations.

The pandemic has resulted, and may continue to result, in significant economic disruption that has and may likely continue to adversely affect our business.

In mid-March, the Company started to see a slowdown in its business activity, initially and primarily in the automotive industry and in the state of Michigan due to its customers being impacted by the COVID-19 pandemic. This slowdown reached its most acute level midway through the second quarter. In mid-May as state and local officials began easing quarantine and “stay at home” orders we saw an increase in business activity levels that continued to trend positively through the remainder of the second quarter. While business activity levels stabilized in the third quarter to near pre-COVID levels, with the exception of our rental fleet utilization which continues to lag 2019 levels, as of the time of this filing, we are unable to predict the exact impact the COVID-19 pandemic will have on our business in fourth quarter of 2020 and into 2021. COVID-19’s impact on our fourth quarter of 2020 and 2021 financial results and beyond will depend on future developments, such as the duration and scope of outbreaks and the potential for future “shelter in place” orders that could impact our employees, customers and suppliers. Although we’ve seen improvements in business activity in the third quarter of 2020 when compared to the second quarter of 2020, we expect our full year 2020 results to be adversely affected by COVID-19. Specifically, if there is a resurrection of the “stay at home” restrictions in the fourth quarter of 2020, our business and financial performance would likely be negatively impacted.

Nevertheless, we are able to address our continuing response to the pandemic, and how COVID-19 may impact our results and financial condition going forward. Based on business conditions as of the date of this filing, the Company believes it has sufficient liquidity to fund operations for the foreseeable future so long as business conditions and economic activity remain at current levels. However, if there are future “shelter in place” orders or similar measures taken in the geographies where we operate and the demand for our products and services is adversely impacted, we may take additional actions to further reduce costs and/or seek additional financing.

 

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USE OF PROCEEDS

The net proceeds from the sale of the depositary shares in this offering, after deducting the underwriting discount, the structuring fee and other estimated expenses of this offering payable by us, are estimated to be approximately $28,010,000 million (approximately $28,250,00 million if the underwriters’ option to purchase up to 10,000 additional depositary shares is exercised in full).

We anticipate using the net proceeds from this offering primarily to continue to fund our growth, including future acquisitions and investments and for general corporate purposes. The amounts and timing of our use of the net proceeds from this offering will depend on a number of factors, including the timing and progress of our acquisition initiatives for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, capital expenditures and funding working capital. Pending such use, we may invest the net proceeds in short-term interest-bearing accounts, securities or similar investments.

MARKET FOR OUR SECURITIES

Our common stock is traded on the NYSE under the symbol “ALTG.” Our public warrants are traded on the NYSE under the symbol “ALTG.WS.”

We will apply to list the depositary shares on the NYSE under the symbol “ALTG PR A.” If this application is approved, we expect trading in the depositary shares to commence within 30 days of the initial delivery of the depositary shares to the underwriters.

At November 30, 2020, there were 32 holders of record of our common stock and 19 holders of record of our warrants.

 

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THE BUSINESS COMBINATION

This section describes the material provisions of the certain agreements entered into in connection with the business combination, but does not purpose to describe all of the terms of such agreements. The following summary is qualified in its entirety by reference to the complete text of such agreements, copies of which are included as exhibits to the registration statement of which this prospectus is a part.

Summary of the Business Combination

Upon the consummation of the business combination on February 14, 2020, Merger Sub merged with and into Alta Holdings, with Alta Holdings surviving the merger in accordance with the Michigan General Corporation Law as a wholly owned subsidiary of the Company. In connection with the Closing, the Company changed its name from “B. Riley Principal Merger Corp.” to “Alta Equipment Group Inc.” Unless the context otherwise requires, the “Company” refers to the registrant and its subsidiaries, including Alta and its subsidiaries, after the Closing, and “BRPM” refers to the registrant prior the Closing.

On February 11, 2020, the business combination was approved by the stockholders of BRPM at the special meeting. The business combination was completed on February 14, 2020. In connection with the business combination, 1,049,036 shares of the Company’s common stock were redeemed at a per share price of approximately $10.14. Upon the Closing, the Company had 29,511,359 shares of common stock outstanding, 16,884,213 of which were held by non-affiliates of the Company.

The aggregate consideration for the business combination was $403,000,000, consisting of (i) BRPM’s pay off of Alta’s existing gross debt in the amount of $314 million, (ii) approximately $13 million in cash to Alta Holdings’ existing shareholders and (iii) an aggregate of 7,600,000 shares of common stock valued at $10.00 per share issued to the Holders.

Immediately prior to the closing, pursuant to the forward purchase agreement, dated as of April 8, 2019, by and between the Company and BRPI, the Company issued to BRPI 2,500,000 shares of common stock for $10.00 per share, for an aggregate purchase price of $25,000,000, plus 1,250,000 warrants.

Immediately prior to the Closing, pursuant to the Subscription Agreements, the Company (i) issued to the PIPE investors an aggregate of 3,500,000 shares of common stock for $10.00 per share, for an aggregate purchase price of $35,000,000, plus an additional 178,947 inducement shares, and (ii) transferred to the PIPE investors an aggregate of 1,275,000 inducement warrants. In connection therewith, the Sponsor forfeited 178,947 shares of common stock to the Company for cancellation for no consideration and BRPI and the Sponsor transferred an aggregate of 1,275,000 warrants to the Company for no consideration.

In addition, immediately prior to the Closing, the Sponsor forfeited to the Company for cancellation for no consideration an aggregate of 1,470,855 additional shares of common stock.

Related Agreements

Registration Rights Agreement

In connection with the Closing, on February 14, 2020, the Company and Ryan Greenawalt, Robert Chiles, Anthony Colucci, Craig Brubaker, Alan Hammersley, Richard Papalia, Paul Ivankovics and Jeremy Cionca (collectively, the “Holders”) entered into a Registration Rights Agreement (the “Registration Rights Agreement”). Under the Registration Rights Agreement, the Company committed to register for resale and did register for resale under the Securities Act of 1933, all of the shares of common stock that the Holders received pursuant to the Merger Agreement (collectively, the “Registrable Securities”). The Registrable Securities were registered for resale on a Form S-1 Registration Statement declared effective April 3, 2020.

 

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Credit Agreements

On February 3, 2020, the Company entered into:

 

(i)

a Fifth Amended and Restated ABL First Lien Credit Agreement among the Company, Alta, Alta Enterprises, LLC, a Michigan limited liability company (“Alta Enterprises”), Alta Construction Equipment Illinois, LLC, a Michigan limited liability company (“Alta Construction IL”), Alta Heavy Equipment Services, LLC, a Michigan limited liability company (“Alta Heavy Equipment”), Alta Industrial Equipment Michigan, LLC, a Michigan limited liability company (“Alta Industrial MI”), Alta Construction Equipment, L.L.C., a Michigan limited liability company (“Alta Construction”), Alta Industrial Equipment Company, L.L.C., a Michigan limited liability company (“Alta Industrial Equipment”), NITCO, LLC, a Michigan limited liability company (“NITCO LLC”), Alta Construction Equipment Florida, LLC, a Michigan limited liability company (“Alta Construction FL”), the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (the “ABL Credit Agreement” and the facility thereunder, the “ABL Facility”);

 

(ii)

a Note Purchase Agreement, among the Company, Alta, Alta Enterprises, Alta Construction IL, Alta Heavy Equipment, Alta Industrial MI, Alta Construction, Alta Industrial Equipment, NITCO, Alta Construction FL, the purchasers party thereto, and U.S. Bank National Association, as Administrative Agent (the “Second Lien Note Purchase Agreement” and the loans thereunder, the “Second Lien Facility”); and

 

(iii)

a Fifth Amended and Restated Floor Plan First Lien Credit Agreement among the Company, Alta, Alta Enterprises, Alta Construction IL, Alta Heavy Equipment, Alta Industrial MI, Alta Construction, Alta Industrial Equipment, NITCO, Alta Construction FL, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Floor Plan Credit Agreement” and the facility thereunder, the “Floor Plan Facility”).

ABL Credit Agreement

The ABL Facility is an asset-based revolving loan facility that provides for borrowings of up to the lesser of $300 million or the borrowing base, in each case less outstanding loans and letters of credit. The ABL Credit Agreement became effective on February 14, 2020 (the date of such effectiveness, the “ABL Effective Date”). The ABL Facility has an expiration date of February 13, 2025.

Amounts outstanding, if any, under the ABL Facility bear interest at a rate per annum equal to, at the borrower’s option, either (i) (0.50)% from the ABL Effective Date until delivery of a financial certificate evidencing the average quarterly availability with respect to the fiscal quarter ending on March 31, 2020 and then thereafter, (0.25)% to (0.75)% subject to a pricing grid set forth in the ABL Credit Agreement (depending on the average quarterly availability) plus a CB Floating Rate (as defined in the ABL Credit Agreement) or (ii) 2.00% from the ABL Effective Date until delivery of a financial certificate evidencing the average quarterly availability with respect to the fiscal quarter ending on March 31, 2020 and then thereafter, 1.75% to 2.25% subject to a pricing grid set forth in the ABL Credit Agreement (depending on the average quarterly availability) plus the Adjusted LIBO Rate (as defined in the ABL Credit Agreement). Unused amounts under the ABL Facility incur an unused line fee of 0.25% per annum, payable in full on a quarterly basis.

The ABL Credit Agreement also contains financial covenants with respect to the Total Leverage Ratio (as defined in the ABL Credit Agreement), the First Lien Leverage Ratio (as defined in the ABL Credit Agreement), Second Lien Note Coverage Ratio (as defined in the ABL Credit Agreement) and a minimum Consolidated EBITDA (as defined in the ABL Credit Agreement) of $79 million for the fiscal year ended December 31, 2019. In addition, the ABL Credit Agreement requires us to maintain a fixed charge coverage ratio that is tested whenever excess availability (as defined in the ABL Credit Agreement) falls below a certain level. The fixed charge coverage ratio (as defined in the ABL Credit Agreement) requires the borrower to maintain a minimum ratio of Consolidated EBITDA (as defined in the ABL Credit Agreement) to the amount of its fixed charges for the twelve consecutive months prior to the date on which the ratio is tested.

 

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Second Lien Note Purchase Agreement

The Second Lien Facility provides for borrowings in the amount of either $155 million or $165 million, as selected by the Company on the Second Lien Effective Date (as defined below). The Second Lien Facility became effective on February 14, 2020 (the date of such effectiveness, the “Second Lien Effective Date”). The Second Lien Facility has an expiration date of August 13, 2025.

Amounts outstanding under the Second Lien Facility bear interest at a rate per annum equal to, at the Company’s option, either (i) 7.00% plus the CB Floating Rate (as defined in the Second Lien Note Purchase Agreement) or (ii) 8.00% plus the Adjusted LIBO Rate (as defined in the Second Lien Note Purchase Agreement).

The Second Lien Note Purchase Agreement also contains financial covenants with respect to the Total Leverage Ratio (as defined in the Second Lien Note Purchase Agreement), the First Lien Leverage Ratio (as defined in the Second Lien Note Purchase Agreement), Book Value Ratio (as defined in the Second Lien Note Purchase Agreement) and a minimum Consolidated EBITDA (as defined in the Second Lien Note Purchase Agreement) of $79 million for the fiscal year ended December 31, 2019. In addition, the Second Lien Note Purchase Agreement requires us to maintain a fixed charge coverage ratio that is tested whenever “Availability” (as defined in the Second Lien Note Purchase Agreement) under the ABL Facility falls below a certain level. The fixed charge coverage ratio (as defined in the Second Lien Note Purchase Agreement) requires us to maintain a minimum ratio of Consolidated EBITDA (as defined in the Second Lien Note Purchase Agreement) to the amount of our fixed charges for the twelve consecutive months prior to the date on which the ratio is tested.

Floor Plan First Lien Credit Agreement

The Floor Plan Facility is an asset-based revolving loan facility related to the floor plan equipment that provides for borrowings of up to the lesser of $40 million or the borrowing base, in each case, less outstanding loans and letters of credit. The Floor Plan Credit Agreement became effective on February 14, 2020 (the date of such effectiveness, the “Floor Plan Effective Date”). The Floor Plan Facility has an expiration date of February 13, 2025.

Amounts outstanding, if any, under the Floor Plan Facility bear interest at a rate per annum equal to, at the borrower’s option, either (i) 0.25% from the Floor Plan Effective Date until delivery of a financial certificate evidencing Total Leverage Ratio (as defined in the Floor Plan Credit Agreement) with respect to the fiscal quarter ending on June 30, 2020 and then thereafter, (0.50)% to 0.50% subject to a pricing grid set forth in the Floor Plan Credit Agreement (depending on the Total Leverage Ratio (as defined in the Floor Plan Credit Agreement) plus an CB Floating Rate (as defined in the Floor Plan Credit Agreement)) or (ii) 2.75% from Floor Plan Effective Date until delivery of a financial certificate evidencing the average quarterly availability with respect to the fiscal quarter ending on June 30, 2020 and then thereafter, 2.00% to 3.00% subject to a pricing grid set forth in the Floor Plan Credit Agreement (depending on the Total Leverage Ratio as defined in the Floor Plan Credit Agreement) plus the Adjusted LIBO Rate (as defined in the Floor Plan Credit Agreement). Unused amounts under the Floor Plan Facility incur an unused line fee of 0.20% to 0.40% per annum, payable in full on a quarterly basis subject to a pricing grid set forth in the Floor Plan Credit Agreement.

The Floor Plan Credit Agreement also contains financial covenants with respect to the Total Leverage Ratio (as defined in the Floor Plan Credit Agreement), the First Lien Leverage Ratio (as defined in the Floor Plan Credit Agreement), Second Lien Note Coverage Ratio (as defined in the Floor Plan Credit Agreement) and a minimum Consolidated EBITDA (as defined in the Floor Plan Credit Agreement) of $79 million for the fiscal year ended December 31, 2020. In addition, the Floor Plan Credit Agreement requires us to maintain a fixed charge coverage ratio that is tested whenever excess availability, as defined in the Floor Plan Credit Agreement, falls below a certain level. The fixed charge coverage ratio (as defined in the Floor Plan Credit Agreement) requires us to maintain a minimum ratio of Consolidated EBITDA (as defined in the Floor Plan Credit Agreement) to the amount of our fixed charges for the twelve consecutive months prior to the date on which the ratio is tested.

 

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Credit Agreements

The ABL Credit Agreement, the Second Lien Note Purchase Agreement and the Floor Plan Credit Agreement (collectively, the “Credit Agreements”) contain various customary covenants that limit or prohibit the Company’s ability to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay certain dividends on its capital stock or redeem, repurchase, retire or make distributions in respect of its capital stock or subordinated indebtedness or make certain other restricted payments; (iii) make certain loans, acquisitions, capital expenditures or investments; (iv) sell certain assets, including stock of its subsidiaries; (v) enter into certain sale and leaseback transactions; (vi) create or incur certain liens; (vii) consolidate, merge, sell, transfer or otherwise dispose of all or substantially all of its assets; (viii) enter into certain transactions with its affiliates; and (ix) engage in certain business activities.

A violation of the covenants under any of the Credit Agreements may result in default or an event of default under the ABL Facility, Second Lien Loan Facility, or the Floor Plan Facility, as applicable (together, the “Facilities”). Upon the occurrence of an event of default under one or both of the Credit Agreements, the requisite lenders could elect to declare all amounts of such indebtedness outstanding to be immediately due and payable and terminate any commitments to extend further credit.

If the Company is unable to repay those amounts, the lenders under the applicable Credit Agreement may proceed against the collateral granted to them to secure such indebtedness. Substantially all of the Company’s assets are pledged as collateral under the Credit Agreements. If the lenders accelerate the repayment of borrowings, such acceleration would have a material adverse effect on its business, financial condition, results of operations or cash flows. Furthermore, cross-default provisions in the Credit Agreements provide that any default under any Credit Agreement or other significant debt agreements could trigger a cross-default under the ABL Credit Agreement, Second Lien Note Purchase Agreement or the Floor Plan Credit Agreement, as applicable.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the financial statements and related notes included elsewhere in this prospectus. This discussion contains “forward-looking statements” 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 prospectus, 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

The impact of the COVID-19 pandemic has created significant volatility in the global economy and led to reduced economic activity. On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. Subsequent to this characterization international, federal, state, and local public health and governmental authorities have taken extraordinary measures to contain and combat the outbreak and spread of COVID-19. These actions include travel restrictions, local quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to drastically reduce or cease customary operations.

The pandemic has resulted, and may continue to result, in significant economic disruption that has and may likely continue to adversely affect our business.

In mid-March, the Company started to see a slowdown in its business activity, initially and primarily in the automotive industry and in the state of Michigan due to its customers being impacted by the COVID-19 pandemic. This slowdown reached its most acute level midway through the second quarter. In mid-May as state and local officials began easing quarantine and “stay at home” orders we saw an increase in business activity levels that continued to trend positively through the remainder of the second quarter. While business activity levels stabilized in the third quarter to near pre-COVID levels, with the exception of our rental fleet utilization which continues to lag 2019 levels, as of the time of this filing, we are unable to predict the exact impact the COVID-19 pandemic will have on our business in fourth quarter of 2020 and into 2021. COVID-19’s impact on our fourth quarter of 2020 and 2021 financial results and beyond will depend on future developments, such as the duration and scope of outbreaks and the potential for future “shelter in place” orders that could impact our employees, customers and suppliers. Although we’ve seen improvements in business activity in the third quarter of 2020 when compared to the second quarter of 2020, we expect our full year 2020 results to be adversely affected by COVID-19. Specifically, if there is a resurrection of the “stay at home” restrictions in the fourth quarter of 2020, our business and financial performance would likely be negatively impacted.

Nevertheless, we are able to address our continuing response to the pandemic, and how COVID-19 may impact our results and financial condition going forward. Based on business conditions as of the date of this filing, the Company believes it has sufficient liquidity to fund operations for the foreseeable future so long as business conditions and economic activity remain at current levels. However, if there are future “shelter in place” orders or similar measures taken in the geographies where we operate and the demand for our products and services is adversely impacted, we may take additional actions to further reduce costs and/or seek additional financing.

 

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Remote Work Arrangements

In late March 2020, in compliance with the directives of government authorities in the state and local geographic areas in which we have operations, we adjusted our operations to permit virtually all of our sales and back office employees to work remotely. In late second quarter of 2020, we phased in a return to more normalize working conditions as state or local governments began lifting restrictions. Despite the lifting of certain restrictions, Alta continues to adhere to government issued guidelines and promote a clean and safe environment in all of its branch locations. Where and when applicable, certain non-revenue producing business functions have been able to operate via remote work arrangements which have been designed to allow for the continued operation of our business while allowing employees to work virtually.

Liquidity

Although we were deemed an “essential” business in all of our geographies, many of our customers were drastically impacted by COVID-19 in the second quarter of 2020, which led to an adverse effect on the Company’s financial performance in the quarter.

Despite the relative reduction in revenues in the second quarter and in order to preserve our liquidity, our senior executive officers volunteered to accept pay reductions, we implemented an employee furlough program and took various other cost savings measures to prioritize preserving our liquidity position. We believe the measures we took were prudent and successful in helping to preserve our liquidity position. As business conditions and customer demand returned to more normalized levels, many of these cost savings measures and furlough programs were removed and eliminated in the third quarter. While our sales and services related operations are performing at near pre-COVID levels, our rental fleet utilization has lagged pre-COVID performance which prevented the Company from generating an optimal level of cash flow commensurate with pre-COVID levels in the third quarter. The Company will continue to monitor utilization and, in-turn, rationalize rental fleet levels to match expected demand in the fourth quarter of 2020 and through the end of COVID-19 pandemic. Additionally, we believe that the acquisitions and investments made in the second and third quarters of 2020 expand our service capabilities, geographic reach, end market diversification and product offerings; each of which ultimately strengthens our resiliency to economic shocks and will help to preserve liquidity over the long term. After considering current business conditions, we believe we have sufficient liquidity to fund our operations as we work through the COVID-19 recovery. Our Board of Directors and management team continues to monitor and evaluate the continuing impacts of the COVID-19 pandemic on our business and operations, to the extent business conditions regress from current levels we may take additional actions to further reduce costs and/or seek additional financing to bolster our liquidity position.

Safety Protocols

We have established new safety protocols intended to help protect the health and safety of our workforce as many of them have continued to provide services to our customers in the field or within our branch infrastructure during the COVID-19 outbreak. The protocols comport with state and local guidelines and include, requiring face mask use in our facilities, providing additional personal protective equipment when job requirements do not permit following social distancing guidelines and rigorous facility cleaning protocols.

Business Description

The Company owns and operates one of the largest integrated equipment dealership platforms in the U.S. Through our branch network, we sell, rent, and provide parts and service support for several categories of specialized equipment, including lift trucks and aerial work platforms, cranes, earthmoving equipment and other industrial and construction equipment. We engage in five principal business activities in these equipment categories:

 

(i)

new equipment sales;

 

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(ii)

used equipment sales;

 

(iii)

parts sales;

 

(iv)

repair and maintenance services; and

 

(v)

equipment rentals.

We have operated as an equipment dealership for over 35 years and have developed a branch network that includes 51 total locations in Michigan, Illinois, Indiana, Massachusetts, Maine, Connecticut, New Hampshire, Vermont, New York, Virginia and Florida. We offer our customers a one-stop-shop for most of their equipment needs by providing sales, parts, service, and rental functions under one roof. More recently, with the acquisition of PeakLogix, we have entered the automated equipment installation and system integration sector, which we believe has natural synergies with our material handling business and positions us to take advantage of the macroeconomic trend in warehousing and logistics, and e-commerce.

Within our territories, we are the exclusive distributor of new equipment and replacement parts on behalf of our OEM partners. We and our regional subsidiaries enjoy long-standing relationships with the leading industrial and construction equipment OEMs, including Hyster-Yale, Volvo, and JCB, among more than 30 others. We are consistently recognized by OEMs as a top dealership partner and have been identified as a nationally recognized Hyster-Yale dealer and multi-year recipient of the Volvo Dealer of the Year award.

Business Segments

We have two reportable segments: Industrial Equipment and Construction Equipment. Our segments are determined based on management structure, which is organized based on types of products sold and geographic areas, 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 Industrial Equipment segment is principally engaged in operations related to the sale, service, and rental of lift trucks in Michigan, Illinois, Indiana, as well as parts of the northeastern United States including Massachusetts, Maine, Connecticut, New Hampshire, New York, Vermont, and Rhode Island, and Virginia. The Industrial Equipment segment is made up of the legal entities Alta Industrial Equipment Michigan, LLC, Alta Industrial Equipment Company, LLC, NITCO, LLC, PeakLogix LLC and Alta Industrial Equipment New York, LLC. The Construction Equipment segment is principally engaged in operations related to the sale, service, and rental of construction equipment in Michigan, Indiana, Illinois and Florida. The Construction Equipment segment is made up of the legal entities Alta Construction Equipment, LLC, Alta Construction Equipment Illinois, LLC, Alta Heavy Equipment Services LLC and Alta Construction Equipment Florida, LLC.

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 entities noted above that make up each segment. In addition to being a holding company, Alta Enterprises, LLC also holds corporate debt, debt extinguishment fees, deferred taxes, income tax provision, transaction costs associated with the reverse recapitalization, and has minor activity all together.

Acquisitions

C&M Dahlen Inc.

We entered into an asset purchase agreement on April 13, 2018 to purchase the assets of C&M Dahlen, Inc., d/b/a Elite Heavy Equipment Service (“Elite”). Elite is a provider of field service, preventative maintenance, weld-bore repair, welding and fabrication, component rebuilding, and in-shop repairs in the Spring Grove, Illinois area. The acquisition took place to expand our construction segment in Illinois. Total consideration paid amounted to $4.6 million.

 

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Northland Industrial Truck Co., Inc.

On May 1, 2019, we purchased the assets of Northland Industrial Truck Co., Inc. for a total purchase price of $65.6 million. In connection with the purchase, NITCO LLC was created. The acquisition expands our business into the New England market, diversifies our end market exposure, and provides Alta a growth platform on the East Coast of the United States. The acquisition adds a best-in-class full-service materials handling and construction equipment dealer with operations in Massachusetts, Connecticut, New Hampshire and Maine.

FlaglerCE Holdings, LLC

On February 14, 2020, the Company acquired all the assets of Flagler for a total purchase price of $75.8 million, which was paid out of funds from the closing of the reverse recapitalization. The acquisition expands our heavy equipment segment into the Florida construction market, scales our relationship with a major OEM and provides an opportunity for us to deploy our aftermarket strategies in a robust and growing construction market in the southeastern United States.

Liftech Equipment Companies, Inc.

On February 14, 2020, the Company acquired all the assets of Liftech for a total purchase price of $18.4 million, which was paid out of funds from closing of the reverse recapitalization. The acquisition primarily expands our materials handling segment into the upstate New York market, scales our relationship with a major OEM and provides an opportunity for Alta to drive market share with allied products in the region.

PeakLogix, Inc.

On June 12, 2020, the Company acquired all the assets of PeakLogix for a total cash purchase price of $5.7 million, which was paid out of available funds. Additional consideration includes $1.0 million in an unsecured one-year promissory note at 6% and earn-out payment of a minimum $2.0 million up to $3.7 million to be paid out to former owners based on meeting certain financial targets through-out the 5-year earn-out period. The acquisition represents the Company’s entrance into the automated equipment installation and system integration sector, which we believe has natural synergies with our material handling business and positions us to take advantage of the macroeconomic trend in warehousing and logistics, and e-commerce.

Hilo Equipment & Services

On July 1, 2020, the Company acquired all the assets of Hilo, a distributor of material handling equipment with three branches in the New York City metro area. Under the terms of the agreement, the purchase price at close was $18.2 million in cash, including certain new floorplan inventory and potential earn out payments of $1.0 million tied to post closing performance of the Hilo business. The acquisition aligns with our growth strategy by expanding our distribution footprint with a major OEM, giving us a strategic presence in yet another densely populated major market and strengthens our overall coverage of the Northeastern United States.

Martin Implement Sales, Inc.

On September 1, 2020, the Company acquired all the assets of Martin for a total purchase price of $16.2 million, which included floorplan eligible new equipment inventories, which was paid out of available funds. This acquisition enhances our position in the Illinois construction market, broadens our product portfolio in the compact segment of the construction equipment market and adds valuable service capabilities in the region.

Howell Tractor

On October 30, 2020, the Company acquired all the assets of Howell Tractor and Equipment, LLC for a cash purchase consideration of $23.8 million. The Company, additionally, issued 507,143 shares of its common

 

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stock in connection with the purchase agreement, yielding a total enterprise value of approximately $23.8 million, excluding approximately $3.4 million of floorplan eligible new equipment inventories. This acquisition expands our presence in the Northern Illinois and Northwest Indiana markets adding an expansive range of product portfolio and service offerings.

Financial Statement Components

Our revenues and related costs are primarily derived from sale or rental of equipment and related activities, and consist of:

New Equipment Sales. We sell new heavy construction and industrial 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, we provide automated equipment installation and system implementation solutions.

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, or , as is primarily the case in our industrial segment, equipment that has been designated for disposal and has been transferred to our used inventory from our rental fleet. Used equipment sales made in our territories, like new equipment sales, generate parts and services business for us, as well.

Parts Sales. We sell replacement parts to customers and supply parts to our own rental fleet. Our in-house parts inventory is extensive such that we are able to provide timely service support to our customers. The majority of our parts inventory is made up of OEM replacement parts for those OEM’s with which we have exclusive dealership agreements to sell new equipment.

Service Support. We provide maintenance and repair services for customer-owned equipment and to 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 services 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, industrial, and compact equipment to our customers on a daily, weekly and monthly basis. Our rental fleet, which we believe to be well maintained has an original acquisition cost (which we define as the cost originally paid to manufacturers plus any capitalized costs) of $381.4 million. The original acquisition cost of our rental fleet excludes the value of assets associated with the guaranteed purchase obligations. 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 high-margin parts and services revenue for us.

General and Administrative expenses. These costs are made up of three main components: personnel costs, operational costs, and occupancy costs. Personnel costs are made up of hourly and salaried wages for

 

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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, information technology, office and shop supplies, general corporate costs, depreciation on non-sales and rental related assets, and intangible amortization. Occupancy costs are made up of all expenses related to office and administrative working space, including rent, utilities, property taxes, and building insurance.

Other Income (Expense). This section of the financial statements is mostly made up of interest expense and other miscellaneous items that result in income or expense. Interest expense is mostly driven by manufacturer floor plan arrangements, a working capital line-of-credit, and a second lien notes payable. Manufacturer floor plans payable are financing arrangements for new, used inventory and rental equipment. Also included in this section of the financials are non-recurring costs, in particular expenses associated with the extinguishment of debt.

Results of Operations

Three and nine months ended September 30, 2020 compared to three and nine months ended September 30, 2019

Consolidated Results

 

		Three months ended September 30,								Increase (Decrease)								Nine months ended September 30,								Increase (Decrease)
		2020				2019				2020 versus 2019								2020				2019				2020 versus 2019
Revenues:
New and used equipment sales		$	97.9			$	61.1			$	36.8				60.2	%		$	275.2			$	167.1			$	108.1				64.7	%
Parts sales			35.5				22.9				12.6				55.0	%			92.3				60.0				32.3				53.8	%
Service revenue			35.5				27.3				8.2				30.0	%			94.1				67.2				26.9				40.0	%
Rental revenue			32.2				27.8				4.4				15.8	%			83.4				66.9				16.5				24.7	%
Rental equipment sales			19.5				10.7				8.8				82.2	%			48.2				26.8				21.4				79.9	%
Net revenue		$	220.6			$	149.8			$	70.8				47.3	%		$	593.2			$	388.0			$	205.2				52.9	%
Cost of revenues:
New and used equipment sales			84.4				53.4				31.0				58.1	%			240.3				146.6				93.7				63.9	%
Parts sales			24.3				14.9				9.4				63.1	%			63.3				39.4				23.9				60.7	%
Service revenue			13.5				10.0				3.5				35.0	%			35.9				24.3				11.6				47.7	%
Rental revenue			5.4				4.3				1.1				25.6	%			14.8				11.4				3.4				29.8	%
Rental depreciation and amortization			19.2				13.7				5.5				40.1	%			47.1				32.9				14.2				43.2	%
Rental equipment sales			17.1				9.3				7.8				83.9	%			41.7				23.1				18.6				80.5	%
Cost of revenue		$	163.9			$	105.6			$	58.3				55.2	%		$	443.1			$	277.7			$	165.4				59.6	%
Gross profit		$	56.7			$	44.2			$	12.5				28.3	%		$	150.1			$	110.3			$	39.8				36.1	%
General and administrative expenses			58.4				37.5				20.9				55.7	%			153.2				95.6				57.6				60.3	%
Depreciation and amortization expense			1.8				0.5				1.3				260.0	%			4.5				1.8				2.7				150.0	%
Total general and administrative expenses			60.2				38.0			$	22.2				58.4	%			157.7				97.4			$	60.3				61.9	%
(Loss) income from operations		$	(3.5	)		$	6.2			$	(9.7	)			(156.5	)%		$	(7.6	)		$	12.9			$	(20.5	)			(158.9	)%

 

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		Three months ended September 30,								Increase (Decrease)								Nine months ended September 30,								Increase (Decrease)
		2020				2019				2020 versus 2019								2020				2019				2020 versus 2019
Other income (expense)
Interest expense, floor plan payable — new equipment			(0.5	)			(0.9	)			0.4				(44.4	)%			(1.8	)			(2.4	)			0.6				(25.0	)%
Interest expense — other			(5.6	)			(4.7	)			(0.9	)			19.1	%			(15.9	)			(12.7	)			(3.2	)			25.2	%
Other income			8.0				0.3				7.7				2566.7	%			8.7				0.9				7.8				866.7	%
Change in fair market of warrants			—				(28.3	)			28.3				(100.0	)%			—				(28.3	)			28.3				(100.0	)%
Loss on extinguishment of debt			—				—				—				NA				(7.6	)			—				(7.6	)			NA
Total other income (expense)		$	1.9			$	(33.6	)		$	35.5				(105.7	)%		$	(16.6	)		$	(42.5	)		$	25.9				(60.9	)%
Loss before taxes		$	(1.6	)		$	(27.4	)			25.8				(94.2	)%		$	(24.2	)		$	(29.6	)			5.4				(18.2	)%
Income tax benefit			(1.9	)			—				(1.9	)			NA				(3.4	)			—				(3.4	)			NA
Net income (loss)		$	0.3			$	(27.4	)		$	27.7				(101.1	)%		$	(20.8	)		$	(29.6	)		$	8.8				(29.7	)%

 

		Percent of Revenue								Percent of Revenue
Consolidated		Three months ended September 30,								Nine months ended September 30,
		2020				2019				2020				2019
Revenues:
New and used equipment sales			44.4	%			40.8	%			46.4	%			43.1	%
Parts sales			16.1	%			15.3	%			15.6	%			15.5	%
Service revenue			16.1	%			18.2	%			15.9	%			17.3	%
Rental revenue			14.6	%			18.6	%			14.1	%			17.2	%
Rental equipment sales			8.8	%			7.1	%			8.1	%			6.9	%
Net revenue			100.0	%			100.0	%			100.0	%			100.0	%
Cost of revenues:
New and used equipment sales			38.3	%			35.6	%			40.5	%			37.8	%
Parts sales			11.0	%			9.9	%			10.7	%			10.2	%
Service revenue			6.1	%			6.7	%			6.1	%			6.3	%
Rental revenue			2.4	%			2.9	%			2.5	%			2.9	%
Rental depreciation and amortization			8.7	%			9.1	%			7.9	%			8.5	%
Rental equipment sales			7.8	%			6.2	%			7.0	%			6.0	%
Cost of revenue			74.3	%			70.5	%			74.7	%			71.6	%
Gross profit			25.7	%			29.5	%			25.3	%			28.4	%

Revenues: Consolidated revenues increased by $70.8 million, or 47.3%, to $220.6 million for the three months ended September 30, 2020 as compared to the same period last year. The primary drivers of this period over period increase were the favorable impact from the acquisitions of Flagler, Liftech, PeakLogix, Hilo and Martin which occurred between February 2020 and September 2020. All revenue streams increased as a result of these acquisitions. Notably, our new and used equipment sales increased by approximately 11.0% on an organic basis compared to the same period in 2019 due to increased sales volume within our existing markets. Additionally, parts and service increased by 7.5% and 4.2% on an organic basis, respectively, quarter over quarter. While sales, parts and service increased on an organic basis, our rental revenue decreased by approximately 13.0% on an organic basis due to a decrease in utilization for the three months ended 2020 compared to the same period in 2019.

Consolidated revenues increased by $205.2 million, or 52.9%, to $593.2 million for the nine months ended September 30, 2020 as compared to the same period last year. Overall, the revenue streams increased as a result

 

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of the NITCO, Flagler, Liftech, Peak Logix, Hilo and Martin acquisitions that closed between May 2019 and September 2020. All revenue streams increased as a result of these acquisitions.

 

		Three months ended September 30,												Nine months ended September 30,
		2020				2019				Change				2020				2019				Change
Consolidated		GP%				GP%				GP%				GP%				GP%				GP%
New and used equipment sales			13.8	%			12.6	%			1.2	%			12.7	%			12.3	%			0.4	%
Parts sales			31.5	%			34.9	%			(3.4	)%			31.4	%			34.3	%			(2.9	)%
Service revenue			62.0	%			63.4	%			(1.4	)%			61.8	%			63.8	%			(2.0	)%
Rental revenue			23.6	%			35.3	%			(11.6	)%			25.8	%			33.8	%			(8.0	)%
Rental equipment sales			12.3	%			13.1	%			(0.8	)%			13.5	%			13.8	%			(0.3	)%
Consolidated gross profit			25.7	%			29.5	%			(3.8	)%			25.3	%			28.4	%			(3.1	)%

Gross profit (GP):

The consolidated gross profit for the three months ended September 30, 2020 was 25.7%, a 3.8% decline from the 29.5% for the same period in 2019. We also realized a decline in rental revenue gross margin in the third quarter of 2020, which was the main driver in the overall depressed margin; specific factors of this decline in rental revenue gross margin are further described herein in the segment levels results. Additionally, parts and service gross margins decreased as a whole, in part due to the relative sales mix being more heavily weighted to our construction segment year over year. This was partially offset by higher gross margin on new and allied products as a result of the PeakLogix acquisition. Additionally, we realized better used equipment gross margin in our industrial segment in the third quarter of 2020 when compared to the same period in 2019.

The consolidated gross profit for the nine months ended September 30, 2020 was 25.3%, a 3.1% decline from the 28.4% for the same period in 2019. The decrease in gross margins were largely driven by the same issues as described above for the reduction in the third quarter of 2020 gross margin when compared with the same period in 2019.

General and Administrative expenses: Consolidated general and administrative (G&A) expenses increased by $22.2 million to $60.2 million for the three months ended September 30, 2020 compared to the same period last year. This increase was mainly driven by the impact from the acquisitions of Flagler, Liftech, PeakLogix, Hilo and Martin. In addition to the acquisitions, the Company incurred $3.2 million share-based compensation expense mainly due to the immediate vesting of restricted stock units related to the passing of our Construction Group President.

Consolidated general and administrative (G&A) expenses increased by $60.3 million to $157.7 million for the nine months ended September 30, 2020 compared to the same period last year. This increase was mainly due to the same drivers described above in addition to the $7.6 million of transaction costs associated with activities directly attributable to the reverse recapitalization. Outside of the reverse recapitalization and acquisition activities, G&A expenses also increased in support of enterprise-wide growth.

Other Income (expense): Consolidated other income for the three months ended September 30, 2020 was $1.9 million compared to $(33.6) million for the same period in 2019. This change was mainly due to $8.0 million in key man life insurance proceeds as a result of the passing away of our Construction Group President, which offset higher borrowings associated with the financing of our recent acquisitions. For the three months ended 2019, the Company incurred a $28.3 million expense as a result of the recognition of an increase in the fair value of warrants held by a former minority shareholder. The increase in fair value was triggered by the implied valuation of the company in the reverse recapitalization

Consolidated other expense decreased by $25.9 million compared to the same period last year. The year over year favorable change was primarily attributable to the activities described above. In addition to the above, the Company incurred $7.6 million loss on debt extinguishment in the reverse recapitalization and had higher

 

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borrowings associated with the reverse recapitalization and acquisition related activities during the nine months ended September 30, 2020.

Provision for income taxes: Income tax benefit for the three months ended September 30, 2020 was $1.9 million compared to $0 for the three months ended September 30, 2019. This benefit was the result of the level of pre-tax loss for the third quarter of 2020.

Income tax benefit for the nine months ended September 30, 2020 was $3.4 million compared to $0 for the nine months ended September 30, 2019. This benefit was the result of the level of pre-tax loss for the period from February 14, 2020 to September 30, 2020.

Industrial Equipment Results:

 

		Three months ended September 30,								Increase (Decrease) 2020 versus 2019								Nine months ended September 30,								Increase (Decrease)   2020 versus 2019
		2020				2019												2020				2019
Revenues:
New and used equipment sales		$	58.7			$	41.5			$	17.2				41.4	%		$	152.7			$	98.3			$	54.4				55.3	%
Parts sales			16.7				14.3				2.4				16.8	%			43.7				35.7				8.0				22.4	%
Service revenue			23.4				20.2				3.2				15.8	%			61.8				48.4				13.4				27.7	%
Rental revenue			12.2				12.0				0.2				1.7	%			34.2				26.9				7.3				27.1	%
Rental equipment sales			4.0				0.7				3.3				471.4	%			12.3				2.5				9.8				392.0	%
Net revenue		$	115.0			$	88.7			$	26.3				29.7	%		$	304.7			$	211.8			$	92.9				43.9	%
Cost of revenues:
New and used equipment sales			48.5				36.1				12.4				34.3	%			129.6				86.3				43.3				50.2	%
Parts sales			10.6				8.9				1.7				19.1	%			27.8				22.2				5.6				25.2	%
Service revenue			8.5				7.2				1.3				18.1	%			22.4				17.6				4.8				27.3	%
Rental revenue			2.2				1.6				0.6				37.5	%			6.0				4.2				1.8				42.9	%
Rental depreciation and amortization			5.4				4.5				0.9				20.0	%			14.5				10.2				4.3				42.2	%
Rental equipment sales			2.9				0.3				2.6				866.7	%			9.4				1.6				7.8				487.5	%
Cost of revenue		$	78.1			$	58.6			$	19.5				33.3	%		$	209.7			$	142.1			$	67.6				47.6	%
Gross profit		$	36.9			$	30.1			$	6.8				22.6	%		$	95.0			$	69.7			$	25.3				36.3	%
General and administrative expenses			31.7				23.8				7.9				33.2	%			80.7				57.7				23.0				39.9	%
Depreciation and amortization expense			1.0				0.4				0.6				150.0	%			2.5				1.4				1.1				78.6	%
Total general and administrative expenses		$	32.7			$	24.2			$	8.5				35.1	%		$	83.2			$	59.1			$	24.1				40.8	%
Income from operations		$	4.2			$	5.9			$	(1.7	)			(28.8	)%		$	11.8			$	10.6			$	1.2				11.3	%
Other income (expense)
Interest expense, floor plan payable — new equipment			(0.2	)			(0.6	)			0.4				(66.7	)%			(1.0	)			(1.4	)			0.4				(28.6	)%
Interest expense — other			(1.2	)			(0.7	)			(0.5	)			71.4	%			(3.3	)			(1.9	)			(1.4	)			73.7	%
Other income			—				0.3				(0.3	)			(100.0	)%			0.4				0.7				(0.3	)			(42.9	)%
Total other income (expense)		$	(1.4	)		$	(1.0	)		$	(0.4	)			40.0	%		$	(3.9	)		$	(2.6	)		$	(1.3	)			50.0	%
Net income		$	2.8			$	4.9			$	(2.1	)			(42.9	)%		$	7.9			$	8.0			$	(0.1	)			(1.3	)%

 

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		Percent of Revenue								Percent of Revenue
Industrial Equipment		Three months ended September 30,								Nine months ended September 30,
		2020				2019				2020				2019
Revenues:
New and used equipment sales			51.0	%			46.8	%			50.1	%			46.4	%
Parts sales			14.5	%			16.1	%			14.3	%			16.9	%
Service revenue			20.3	%			22.8	%			20.3	%			22.9	%
Rental revenue			10.6	%			13.5	%			11.2	%			12.7	%
Rental equipment sales			3.5	%			0.8	%			4.0	%			1.2	%
Net revenue			100.0	%			100.0	%			100.0	%			100.0	%
Cost of revenues:
New and used equipment sales			42.2	%			40.7	%			42.5	%			40.7	%
Parts sales			9.2	%			10.0	%			9.1	%			10.5	%
Service revenue			7.4	%			8.1	%			7.4	%			8.3	%
Rental revenue			1.9	%			1.8	%			2.0	%			2.0	%
Rental depreciation and amortization			4.7	%			5.1	%			4.8	%			4.8	%
Rental equipment sales			2.5	%			0.3	%			3.1	%			0.8	%
Cost of revenue			67.9	%			66.1	%			68.8	%			67.1	%
Gross profit			32.1	%			33.9	%			31.2	%			32.9	%

Revenues: Industrial Equipment segment revenues increased by 29.7% to $115.0 million for the three months ended September 30, 2020 as compared to the same period last year. Overall, revenue streams were up as a result of the Liftech, PeakLogix and Hilo acquisitions that closed in February 2020, June 2020 and July 2020, respectively. While we experienced an acute reduction in customer demand from the global COVID-19 pandemic in the second quarter of 2020, specifically in parts and service, we were able to rebound in the third quarter and both parts and service revenue lines increased by approximately $3.4 million each compared to the second quarter, or up by 28.3% and 19.3%, respectively.

Industrial Equipment segment revenues increased by 43.9% to $304.7 million for the nine months ended September 30, 2020 as compared to the same period last year. The year-over-year increase was mainly due to the contributions from the acquisitions of NITCO, Liftech, PeakLogix and Hilo that occurred between May 2019 and July 2020.

Gross profit (GP):

 

		Three months ended September 30,												Nine months ended September 30,
		2020				2019				Change				2020				2019				Change
Industrial Equipment		GP%				GP%				GP%				GP%				GP%				GP%
New and used equipment sales			17.4	%			13.0	%			4.4	%			15.1	%			12.2	%			2.9	%
Parts sales			36.5	%			37.8	%			(1.2	)%			36.4	%			37.8	%			(1.4	)%
Service revenue			63.7	%			64.4	%			(0.7	)%			63.8	%			63.6	%			0.1	%
Rental revenue			37.7	%			49.2	%			(11.5	)%			40.1	%			46.5	%			(6.4	)%
Rental equipment sales			27.5	%			57.1	%			(29.6	)%			23.6	%			36.0	%			(12.4	)%
Segment gross profit			32.1	%			33.9	%			(1.8	)%			31.2	%			32.9	%			(1.7	)%

Industrial Equipment gross profit margins for the three months ended September 30, 2020 declined 1.8% to 32.1% compared to the same period in 2019. New equipment sales gross margin benefited from the addition of PeakLogix to the sales mix in the third quarter of 2020. As PeakLogix “design and build” higher margin business line realizes higher gross margin than the gross margin on new and allied products in our legacy business.

 

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Additionally, we realized better used equipment gross margin in the third quarter of 2020 when compared to the third quarter of 2019. We also realized a decline in rental revenue gross margin in the third quarter of 2020 which was the main driver in the overall depressed margin. This reduction in rental gross margin was the result of reduced quarter-over-quarter utilization of our rental fleet and the fixed depreciation on our Industrial rental fleet and an increase in repairs and maintenance and subleasing expense quarter-over-quarter as a percentage of revenue. Notably, overall, our gross profit for the three months ended September 30, 2020 increased by $9.2 million, or 33.2% versus the second quarter of 2020. This increase in gross profit is almost exclusively related to the increase in business activity we experienced once “stay at home” orders and related restrictions were relaxed near the end of the second quarter.

Industrial Equipment gross profit margins for the nine months ended September 30, 2020 declined 1.7% to 31.2% compared to the same period in 2019 for the aforementioned reasons.

General and administrative expenses: Industrial Equipment general and administrative (G&A) expenses increased by 8.5 million to $32.7 million for the three months ended September 30, 2020 as compared to the same period last year. This change was mainly driven by the addition of the G&A from the Industrial segment acquisitions Liftech, PeakLogix and Hilo. As business activity recovered in the third quarter of 2020, cost mitigation efforts related to COVID in the form of pay reductions, employee furlough programs and reductions in benefits ceased, causing an increase in G&A in the third quarter when compared to the second quarter.

Industrial Equipment general and administrative (G&A) expenses increased by 24.1 million to $83.2 million for the nine months ended September 30, 2020 as compared to the same period last year. This increase was primarily due to the inclusion of the G&A from the Industrial segment acquisitions, NITCO, Liftech, PeakLogix and Hilo.

Other Income (expense): Industrial Equipment other expense increased by $0.4 to ($1.4) million for the three months ended September 30, 2020 as compared to the same period last year. The majority of the quarter-over- quarter increase was the result of the addition of debt related to the Liftech, PeakLogix and Hilo acquisitions, as their assets were financed via our line of credit and floorplan financing facilities.

Industrial Equipment other expense increased by $1.3 million to ($3.9) million for the nine months ended September 30, 2020 as compared to the same period last year. The majority of the year-over-year increase was the result of the addition of debt related to the NITCO, Liftech, PeakLogix and Hilo acquisitions, as their assets were financed via our line of credit and floorplan financing facilities.

 

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Construction Equipment Results

 

		Three months ended September 30,								Increase (Decrease) 2020 versus 2019								Nine months ended September 30,								Increase (Decrease) 2020 versus 2019
		2020				2019												2020				2019
Revenues:
New and used equipment sales		$	39.2			$	19.6			$	19.6				100.0	%		$	122.5			$	68.8			$	53.7				78.1	%
Parts sales			18.8				8.6				10.2				118.6	%			48.6				24.3				24.3				100.0	%
Service revenue			12.1				7.1				5.0				70.4	%			32.3				18.8				13.5				71.8	%
Rental revenue			20.0				15.8				4.2				26.6	%			49.2				40.0				9.2				23.0	%
Rental equipment sales			15.5				10.0				5.5				55.0	%			35.9				24.3				11.6				47.7	%
Net revenue		$	105.6			$	61.1			$	44.5				72.8	%		$	288.5			$	176.2			$	112.3				63.7	%
Cost of revenues:
New and used equipment sales			35.9				17.3				18.6				107.5	%			110.7				60.3				50.4				83.6	%
Parts sales			13.7				6.0				7.7				128.3	%			35.5				17.2				18.3				106.4	%
Service revenue			5.0				2.8				2.2				78.6	%			13.5				6.7				6.8				101.5	%
Rental revenue			3.2				2.7				0.5				18.5	%			8.8				7.2				1.6				22.2	%
Rental depreciation and amortization			13.8				9.2				4.6				50.0	%			32.6				22.7				9.9				43.6	%
Rental equipment sales			14.2				8.9				5.3				59.6	%			32.3				21.4				10.9				50.9	%
Cost of revenue		$	85.8			$	46.9			$	38.9				82.9	%		$	233.4			$	135.5			$	97.9				72.3	%
Gross profit		$	19.8			$	14.2			$	5.6				39.4	%		$	55.1			$	40.7			$	14.4				35.4	%
General and administrative expenses			24.9				13.4				11.5				85.8	%			60.4				36.8				23.6				64.1	%
Depreciation and amortization expense			0.8				0.1				0.7				700.0	%			2.0				0.4				1.6				400.0	%
Total general and administrative expenses		$	25.7			$	13.5			$	12.2				90.4	%		$	62.4			$	37.2			$	25.2				67.7	%
(Loss) income from operations		$	(5.9	)		$	0.7			$	(6.6	)			(942.9	)%		$	(7.3	)		$	3.5			$	(10.8	)			(308.6	)%
Other income (expense)
Interest expense, floor plan payable — new equipment			(0.3	)			(0.4	)			0.1				(25.0	)%			(0.8	)			(1.1	)			0.3				(27.3	)%
Interest expense — other			(2.4	)			(1.7	)			(0.7	)			41.2	%			(7.0	)			(4.9	)			(2.1	)			42.9	%
Other income			—				—				—				NA				0.3				0.2				0.1				50.0	%
Total other income (expense)		$	(2.7	)		$	(2.1	)		$	(0.6	)			28.6	%		$	(7.5	)		$	(5.8	)		$	(1.7	)			29.3	%
Net loss		$	(8.6	)		$	(1.4	)		$	(7.2	)			514.3	%		$	(14.8	)		$	(2.3	)		$	(12.5	)			543.5	%

 

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