EDGAR 10-K Filing

Company CIK: 1759824
Filing Year: 2023
Filename: 1759824_10-K_2023_0000950170-23-007039.json

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ITEM 1. BUSINESS
Item 1. Business.
Overview
We own and operate one of the largest integrated equipment dealership platforms in the United States (“U.S.”) and have a presence in Canada. Through our branch network, we sell, rent, and provide parts and service support for several categories of specialized equipment, including lift trucks, heavy and compact earthmoving equipment, environmental processing equipment, and other material handling and construction equipment. We engage in five principal business activities in these equipment categories:
(i)new equipment sales;
(ii)used equipment sales;
(iii)parts sales;
(iv)repair and maintenance services; and
(v)equipment rentals.
Within our territories, we are the exclusive distributor of new equipment and replacement parts on behalf of our Original Equipment Manufacturer (“OEM”) partners. We and our regional subsidiaries enjoy long-standing relationships with leading material handling and construction equipment OEMs, including Hyster-Yale, Volvo, JCB and Kubota, among many others as well as master dealer rights throughout North America for environmental processing equipment with Doppstadt and Backers, among 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. More recently, the Company entered into a dealer agreement with Nikola Corporation to become the authorized dealer to sell and service Nikola medium and long-haul class 8 electric vehicle trucks in New York, New Jersey, eastern Pennsylvania and New England markets.
We are committed to providing our customers with a best-in-class equipment dealership experience. Our customers are principally focused on equipment reliability and uptime, and our teams of skilled technicians and commitment to service are key to establishing and maintaining long-term customer relationships, representing a critical competitive advantage. Parts and service are also our most predictable and profitable businesses, with the dealership model structured to drive aftermarket parts and service revenue. Through our new and used equipment sales and our sale of lightly used rental fleet, we populate our exclusive territories with serviceable equipment. As the field population ages, we capitalize on aftermarket parts and service sales through the equipment maintenance cycle.
Products and Services
New Equipment Sales. We sell new material handling, construction and environmental processing equipment and are a leading dealer for nationally recognized OEMs. Our new equipment sales generate customers for our parts sales and service operations, which grow with an expanding equipment field population in our territories. Additionally, we provide warehouse design and build services, automated equipment installation and system integration solutions within our Material Handling segment.
Used Equipment Sales. We sell used equipment, primarily from equipment trade-ins from our new and returning customers. Used equipment sales, like new equipment sales, generate parts and services business for us.
Parts Sales. We are the exclusive distributor of OEM parts in substantially all of our territories. Our in-house parts inventory is extensive, enabling us to provide timely service support to our customers.
Service Support. We provide maintenance and repair services for our customers’ equipment and maintain our own rental fleet. In addition to repair and maintenance on an as needed or scheduled basis, we provide recurring maintenance services and warranty repairs for our customers.
Equipment Rentals. We rent material handling and construction equipment to our customers. We view our rental fleet as an important component of our one-stop-shop model, and customers rely on our rental equipment to integrate into their business over the long term when flexing up their fleet capacity for a project or when customer-owned equipment is being serviced. Our rental business also supports our rent-to-sell strategy, in which we sell equipment from our rental fleet to customers who prefer to purchase lightly used equipment. As with new and used equipment sales, the rent-to-sell solution generates parts and service revenue as equipment is sold into our territories.
Industry Background
The industries for material handling, construction and environmental processing equipment are driven by a broad range of economic factors and trends, including the ongoing transition of consumer preferences toward online retail and the associated warehousing and logistics requirements, residential, non-residential and infrastructure related construction trends, manufacturing and distribution, biofuel, composting, recycling, and general construction, material handling and eco-friendly waste solutions equipment demand. In addition, regional factors have an impact, particularly where equipment dealerships have territorial exclusivity with OEM partners.
OEMs have pushed for consolidation in their dealership networks, and we believe that we are one of the few natural consolidators in our industry. We are one of a very limited number of public equipment dealerships, and we believe that our public profile will be a significant advantage when sourcing and competing for acquisition targets. Furthermore, many equipment dealerships are family-owned operations, and retiring management teams have struggled to develop succession plans. We are a recognized consolidator in the industry, and many incumbent dealership owners have approached our management about potential sale transactions as a result. We believe that these dynamics will contribute to a steady acquisition pipeline at attractive valuation levels.
Competitive Strengths
We believe that the following attributes are important to our ability to compete effectively and to achieve our financial objectives:
Integrated Dealership Platform Providing Full Scale Solutions to Customers. Our integrated equipment sales, service, and rental platform provide a one-stop-shop for a highly diverse group of customers, enabling us to profitably grow our revenue throughout the years and giving us a competitive advantage over our single channel competitors and traditional equipment rental houses, which may have difficulty expanding due to the infrastructure, training, and relationships necessary to support a growing population of equipment in a designated territory and that typically have limited parts and service offerings. With our over 70 dealership locations, we believe that our scale will help us be the leading provider of material handling, construction, and environmental processing equipment and aftermarket parts and service support in each of our territories.
Superior Parts and Services Operations Supporting Customer Relationships. We provide parts and service to our customers 24 hours a day, 365 days a year. Our parts and service capabilities support customers in maximizing equipment uptime, which we believe is a key consideration when an equipment customer is making a selection among competing product offerings. The aftermarket parts and service businesses provide us with a predictable, high-margin revenue source that is relatively insulated from the typical business cycle.
Ability to Attract and Retain Skilled Technical Employees. We believe that we provide best-in-class parts and service support to our customers, and the ability to attract and retain skilled technicians is critical to aftermarket performance. We have partnered with trade and technical schools in all of our territories and these relationships, along with our recruiting prowess, provide us with a pipeline of skilled employees. To retain employees, we offer attractive benefits, clean facilities with the most advanced diagnostic software, modern tools and OEM parts. Above all, we view our technicians as key contributors to future success, and we accord respect to our skilled technicians.
Leading Dealer for Equipment Manufacturers. We are a leading U.S. dealer for many nationally recognized material handling, construction, and environmental processing equipment OEMs, including Hyster-Yale, Volvo, JCB, Kubota and Doppstadt. Our primary dealer agreements grant us exclusivity for new equipment, replacement part sales, and diagnostic service software in our territories. The OEM relationships also promote our acquisition strategy, as the OEMs prefer to partner with fewer, larger financially stable dealerships and view us as a prominent consolidator.
High-Quality Rental Fleet for Rent-to-Sell and Rent-to-Rent Programs. Equipment rental is complementary to our new and used equipment sales and is an important component of our one-stop-shop model. Rental operations are fully aligned with our dealership strategy, as the rent-to-sell solution provides an additional sales channel by which we are able to populate our territories with equipment and generate high-margin parts and service revenue thereafter. In addition, our existing equipment customers rely on our rental fleet when facing short-term equipment needs and when customer equipment is being serviced.
Experienced Management Team. Our senior management team is led by Chief Executive Officer ("CEO") Ryan Greenawalt, Chief Financial Officer ("CFO") Anthony Colucci and Chief Operating Officer ("COO") Craig Brubaker, each of whom has substantial experience in the equipment distribution industry. Our senior leadership is well known and highly respected in the industry. Industry relationships provide a meaningful portion of our acquisition pipeline, as dealership owners frequently approach our management team to discuss a sale. Additionally, our senior leadership team is experienced in managing our business throughout the business cycle.
Business Strategy
We employ the following business strategies:
Align with World-Class Original Equipment Manufacturers by Securing Dealership Agreements for Exclusive Territories. We contractually agree with best-in-class material handling and construction equipment OEMs to represent them exclusively in designated territories (i.e. a state or province). These exclusive agreements allow us to take a long-term view to a given market place, build a complementary product offering which drives market share with customers and ultimately allows us, and our OEMs, to focus on growing market share within the territory. Importantly, these agreements give us exclusive rights to purchase OEM parts and the access to OEM software which allows us to safely and effectively repair our customers equipment.
Grow the Field Population of Equipment in Our Territories and Leverage that Equipment to Grow Parts and Service Revenue. We actively populate our territories with new and used equipment, which generates predictable, high-margin parts and service revenue. We follow this strategy with each of our acquisitions into new territories and with new OEM partnerships, growing the field population of equipment through our new, used, and rent-to-sell sales channels upon market entry. As a result, we expect future benefits from increasing aftermarket parts and service revenue driven by the equipment maintenance cycle.
Recruit Skilled Technicians to Expand the Parts and Service Operations. We depend on our teams of technicians to provide customers with best-in-class parts and service support, and we have developed a multifaceted strategy to recruit skilled mechanics. We regularly hire mechanics away from independent rental or service businesses in our markets, where a lack of access to OEM parts and diagnostic tools make servicing increasingly sophisticated equipment difficult. Additionally, we have been successful in hiring skilled technicians from other industries, such as the automotive industry. Also, our partnerships with technical schools and community colleges provide consistent access to new technicians. We intend to replicate this strategy as we acquire additional dealership territories.
Pursue Strategic Acquisitions. Our management team has successfully completed over 25 acquisitions. We have two primary areas of focus when pursuing acquisitions:
•Territory In-Fill. Within our existing territories, we pursue acquisitions that may provide for new OEM relationships whose equipment will complement the existing product portfolio in a territory, new customer relationships and pools of skilled technicians. These acquisitions advance the parts and service strategy by simultaneously increasing the field population within the existing territory and expanding the number of skilled technicians to generate predictable, high-margin service and parts revenue.
•Territorial Expansion. Our geographic footprint has grown through acquisitions, from our original Michigan lift truck territory to a leading equipment dealer with operations in the Midwest, New York, New England, Florida, parts of Ontario and Quebec. In selecting additional territories for acquisition, we prioritize opportunities that can be improved by our systems and processes and/or markets with a high density of equipment users.
Pursue Synergistic Verticals. With our existing expertise with commercial equipment dealerships, we pursue strategic opportunities to leverage our knowledge in operating equipment dealerships to grow into other tangential verticals of commercial equipment of over-the-road vehicles. As an example, to leverage our prowess in e-mobility and meet the growing demand for commercial electric vehicles within our existing territories, we have entered the over-the-road vehicle dealership industry by virtue of our new partnership with Nikola. Similarly, with our historic success and customer relationships in equipment distribution for OEMs in exclusive territories, we will pursue growth opportunities in the wholesale equipment distribution sector, where we look to contractually possess master dealer rights for to distribute OEM equipment in a significant geographic territory (e.g. North America). Our recent acquisition of Ecoverse Industries, LTD ("Ecoverse") represents our entrance into the wholesale equipment distribution sector.
Customers
Our customer end markets include diversified manufacturing, food and beverage, wholesale/retail, distribution, construction, automotive, municipal/government, and medical. Our customers vary from small, single machine owners to large construction contractors and leading multi-national commercial companies. In 2022, no single customer accounted for more than 1% of our total revenues. Our top ten customers combined accounted for approximately 5% of our total revenues in 2022.
Floorplan Financing
New equipment inventory is primarily financed with OEM floorplan facilities with an initial promotional period that is either subsidized or interest-free. OEMs provide this financing to enable dealers to carry equipment in anticipation of customer orders and to increase market share. In many cases we sell the equipment financed by its floorplan facilities before the expiration of the promotional
interest period. We view floorplan financing on new equipment inventory that is less than a year old as a component of our working capital, and do not consider floorplan financing on new equipment as part of our corporate indebtedness.
Sales and Marketing
We have organized our sales forces to be aligned around specific equipment types. We believe specialized sales forces for types of equipment allows our sales teams to develop expertise in certain end markets which allow them to effectively meet the demands of our diverse customer base. We have commission-based compensation programs for our sales forces.
We provide extensive training, including frequent factory and in-house training by OEM representatives regarding the operational features of our equipment to further develop our sales team’s knowledge and experience. This training is essential, as our sales personnel regularly call on customers’ job sites and facilities, often assisting customers in assessing their immediate and ongoing equipment needs.
We utilize a customized Enterprise Resource Planning (“ERP”) tool, called e-Emphasys, which includes a sophisticated customer relationship management ("CRM") functionality. e-Emphasys was designed specifically for equipment dealerships. We believe that our ERP and its CRM enhances our territory management capabilities by increasing the productivity of our sales teams and by tracking equipment service history to advance our customer support goals.
While our specialized, well-trained sales force strengthens our customer relationships and fosters customer loyalty, we also promote our business through marketing and advertising, including industry publications, digital marketing, direct mail campaigns, television and radio, and our website at www.altaequipment.com. The information contained on such websites is not a part of this Annual Report on Form 10-K and is not deemed incorporated by reference into this Annual report on Form 10-K or any other public filing made with the SEC. Advertising and marketing costs are expensed as incurred and for the years ended December 31, 2022, 2021 and 2020 were $5.4 million $5.5 million, and $3.5 million respectively.
Suppliers
We purchase a significant amount of equipment and parts from a large number of manufacturers with whom we have distribution agreements. We purchased approximately 43% of our new equipment, rental fleet, and replacement parts from four major OEMs (Hyster-Yale, Kubota, JCB and Volvo) during the year ended December 31, 2022. Notably, we are the exclusive OEM replacement part distributor in substantially all of our territories, allowing us to provide superior service support to our customers from an aftermarket perspective.
Information Technology ("IT") Systems
Among other metrics, our information systems track rental inventory and labor utilization statistics, and detailed operational and financial information. Our integrated services platform enables us to closely monitor our performance and our business. Our point-of-sale system enables us to link all of our facilities, permitting universal access to real-time data concerning equipment located at the individual facility locations and the rental status and maintenance history for each piece of equipment. Our business system is a full suite of highly integrated software solutions intended to manage equipment dealership activities at all essential levels. Real-time data and analytics provide detailed visibility to information across all functional areas, promoting proactive, data-driven decisions. Over 75 points of integration with our OEMs have been implemented which have greatly streamlined activities in the areas of parts inventory management and pricing, warranty claims handling, accounts payable automation, and supporting commercial credit accounts. Additional operational efficiencies are gained through our use of integrated solutions such as electronic document management, service scheduling and technician dispatch, mobile field service, and mobile equipment inspection. Analytics are provided through a data warehouse which is tightly integrated with the business system, providing real-time reports and key performance indicator dashboards that are tailored to meet the specific needs of each department and region.
Our CRM system provides sales and customer information, available rental fleet and inventory information, a quote system and other organizational tools to assist our sales forces. We maintain an extensive customer database which allows us to monitor the status and maintenance history of our customers’ owned equipment and enables us to more effectively provide parts and services to meet their needs. Our critical systems run on servers and other equipment that represents current technology from reputable suppliers and is serviced through existing maintenance agreements.
Product Warranties
Product warranties for new equipment and parts are provided by our OEM partners. The term and scope of these warranties vary greatly by supplier and by product. The OEMs pay us for repairs we perform on equipment under warranty in our territories.
Seasonality
The demand for our construction equipment tends to be lower in the winter months, and equipment rental performance will generally correlate to the levels of current construction activities, so the severity of weather conditions can have an impact on our business, especially in our Northern territories.
Parts and services activities are less affected by changes in demand caused by seasonality, especially in our material handling segment, and are highly predictable based on historical maintenance and service trends as equipment ages.
Competition
The material handling and construction equipment sales and distribution industries are competitive and remain fragmented, with large numbers of competitors operating on a regional or local scale. Within our territories, our competitors range from multi-location, regional operators to single-location dealers of competing equipment brands. We compete with other equipment dealers that sell other brands of equipment that we do not represent or that we do not represent in a particular market. We also compete with local and nationwide rental businesses in certain product categories.
Competition among equipment dealers, whether they offer material handling or construction equipment or both, is primarily based on customer service, including repair and maintenance service provided by the dealer, reputation of the OEM and dealer, quality and design of the products, and price. In our experience, reliability and uptime are the key considerations for customers in selecting a material handling and construction equipment dealer, and we believe that our focus on parts and service support has helped us win and maintain customer business. In contrast, price is not typically a customer’s key point of differentiation in selecting among competing equipment, as OEM partners often provide pricing flexibility and discounting in order to drive market share.
Within substantially all of our territories, we are the exclusive distributor of new equipment and replacement parts on behalf of our OEM partners. This exclusivity affords us effectively no competition from others when selling these brands in our territories.
Environmental, Health and Safety Regulations
Our facilities and operations are subject to various, comprehensive, and frequently changing federal, state, and local environmental and occupational health and safety laws and regulations in the U.S. These requirements govern, among other things, the handling, storage, use and disposal of hazardous materials and wastes and, if any, the associated cleanup of properties affected by discharges, releases, or exposure to pollutants, air quality (emissions) and wastewater, as well as the protection of human health and safety. We do not currently anticipate any material adverse effect on our business, financial condition or competitive position as a result of our compliance with such requirements. We will continue to take necessary steps to comply with environmental requirements, but we do not expect to incur material capital or other expenditures for environmental controls or compliance.
Human Capital
Employees
As of December 31, 2022, we had approximately 2,800 employees. Of these employees, approximately 1,150 are skilled technicians paid on an hourly basis and the remainder are hourly and salaried corporate, sales, operating, and administrative personnel. We have approximately 550 employees covered by collective bargaining agreements. We believe our relations with our employees are good, and we have never experienced a long-term work stoppage. We are committed to fostering a diverse workforce and an inclusive environment and have instituted various initiatives to increase our diversity as it relates to recruiting and training opportunities.
Generally, the total number of employees does not significantly fluctuate throughout the year. However, acquisition activity may increase the number of our employees. Fluctuations in the level of our business activity could require some staffing level adjustments in response to actual or anticipated customer demand.
Health and Safety
The health and safety of our employees is an important focus at Alta. As part of our continuing goal to reduce our recordable injuries, we are committed to regularly reinforcing the importance of our safety programs and encouraging a culture of safe work practices in all of our locations. As part of our evaluation of our management employees, we evaluate the safety records of the employees for whom they have management responsibility.
Talent Development and Employee Training
Our goal is to attract, develop, and retain a talented and high-performing workforce. We are committed to our employees and their development, and we strive to create opportunities for the continual professional development of our employee base. These opportunities include continuing education and specialty training.
Compensation and Benefits
We are committed to providing competitive compensation and benefits programs for our employees as we believe competitive compensation arrangements are core to an engaged and productive employee base. We believe our compensation programs align both individual and team contributions to promote our culture and drive our performance. Substantially all of the Company’s employees are eligible to participate in the Company’s 401(k) and profit-sharing plan. Eligible employees may contribute a percentage of their salary up to the Internal Revenue Service limit. The Company may contribute a discretionary percentage of the amount deferred by the employee. Total contributions made by the Company to the 401(k) plan amounted to approximately $4.0 million, $3.9 million and $1.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. In 2022, our stockholders approved an Employee Stock Purchase Program ("ESPP") which is expected become effective in 2023.
Legal Proceedings
There is no material litigation, arbitration, or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
Available Information
We electronically file annual reports, quarterly reports, proxy statements and other reports and information statements with the SEC. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as well as our other SEC filings, available on our website, investors.altaequipment.com, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished pursuant to section 13(a) or 15(d) of the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC and the address of that site is http://www.sec.gov.
Our principal executive offices are located at 13211 Merriman Road, Livonia, Michigan 48150, and our telephone number is (248) 449-6700. We also make available on our website copies of materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines; our Code of Business Conduct and Ethics; and the charters relating to the committees of our Board of Directors.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Risks Related to the Company’s Business and Industry
The Company’s business could be adversely affected by declines in construction, material handling and environmental processing 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, material handling, and environmental processing activities. Consequently, a downturn in these activities, or the economy in general, may lead to a decrease in the demand for equipment and services or depress rental rates and the sales prices for the Company’s replacement parts and equipment. The Company’s business may also be negatively impacted, either temporarily or long-term, by:
•a reduction in spending levels by our customers;
•unfavorable credit markets affecting our customers access to capital;
•adverse changes in federal, state, and local government infrastructure spending and taxation;
•our inability to pass along operating cost increases related to inflation to customers;
•an increase in the cost of construction materials;
•adverse weather conditions or natural disasters which may affect a particular region;
•a pandemic or similar national or global health crisis;
•a labor work stoppage or shortage of skilled technicians;
•a prolonged shutdown of the U.S. or local government;
•an increase in interest rates;
•adverse foreign currency fluctuations;
•terrorism, war or hostilities involving the U.S. or Canada;
•failure to execute on strategic plans associated with commercial electric vehicle business model; or
•disruptions to global supply chains, specifically our major OEM partner supply chains
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 share.
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 and 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:
•general economic conditions in the markets where we operate;
•the cyclical nature of the Company’s customers’ business, particularly the Company’s construction customers;
•the weather conditions, specifically in our northern markets;
•the timeliness of OEM equipment deliveries;
•seasonal sales and rental patterns of the Company’s construction customers;
•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;
•changes in corporate or 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;
•changes or fluctuations in skilled technician headcount levels;
•the effectiveness of integrating acquired businesses and new start-up locations; and
•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 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 dealership and rental industries are highly competitive and 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 in the market, which could negatively impact our business. 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 is subject to the ability of our OEMs to deliver cost competitive equipment and parts timely.
To the extent the cost of our OEMs equipment is not competitive versus our competition’s equipment, the Company could suffer lost sales and market share over time. This loss of market share would ultimately reduce our serviceable field population of equipment which yields revenue in our high-margin product support departments. Additionally, to the extent our OEMs replacement parts are not cost competitive versus the competition this could impact the total cost of ownership of a piece of equipment from a customer perspective and ultimately lead to lost sales for the Company.
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.
The Company purchases most of its sales and rental equipment, and aftermarket parts from leading, nationally known OEMs. Approximately 43% of the Company’s equipment sales and aftermarket parts are purchased from four major manufacturers (Hyster-Yale, Kubota, JCB, and Volvo). Although the Company believes that it has alternative sources of supply for equipment sales and aftermarket parts 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 and results of operations if it were unable to obtain an adequate replacement supplier.
Some of the Company’s suppliers of new equipment and aftermarket parts 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 recognized suppliers. In certain instances, under the Company’s distribution agreements with these suppliers, manufacturers may generally retain the right to appoint additional dealers and sell directly to national accounts and government agencies. Primarily, the Company has distribution agreements with OEM suppliers which operate under our established course of dealing and are subject to applicable state laws regarding such relationships. In most instances, the suppliers may 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.
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 and results of operations in future periods if the Company is not able to pass such cost increases through to the Company’s customers. Similarly, any increase in the cost of parts the Company purchases for resale could materially impact the Company’s financial condition and 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 and results of operations.
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 generally increases, if not replaced within a certain period of time. 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.
Security breaches and other disruptions in the Company’s IT 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 IT 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 IT networks, including cloud-based networks. The secure operation of these IT 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 IT 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 related to the Company’s field service fleet and for transporting equipment from one location to another. A significant or protracted disruption of fuel supplies could have a material 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.
The Company previously identified three material weaknesses in our internal controls related to ineffective information technology general controls ("ITGCs"), order to cash controls and parts inventory controls which, if we fail to maintain an effective system of internal control in the future, could result in loss of investor confidence and adversely impact our stock price.
As disclosed in Part II, Item 9A, our Annual Report on Form 10-K as of December 31, 2021, management previously identified three material weaknesses in internal control. There were ineffective ITGCs in the areas of user access and segregation of duties over certain information technology (IT) systems that support the Company’s financial reporting processes. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. There were ineffective controls in the aggregate over parts inventory, including cycle counts, receiving controls, and monitoring of adjustments to inventory. Throughout 2022, the Company completed the testing of the design and operating effectiveness of the controls. Management has determined that the controls are adequately designed and are operating effectively and consider these material weaknesses identified in the prior year to be remediated as of December 31, 2022.
Additionally, the Company did not maintain effective controls over the sales process, including proper review and authorization of pricing and discounts, work orders, sales agreements, and rental contracts, which in the aggregate constituted a material weakness. During 2022, we made progress towards remediation of this material weakness as we have enhanced and expanded our policies and procedures over the performance of controls around the sales process, across all lines of business, including proper review and authorization of pricing and discounts, work orders, sales agreements, and rental contracts. We have designed and implemented detective review controls to identify and address deviations from policies in a timely manner. We have developed and delivered training programs to educate personnel concerning the requirements of each control impacting the sales process, but did not fully remediate the order to cash material weakness and concluded that our internal control over financial reporting was not effective as of December 31, 2022. We are continuing to further refine our policies and procedures and train our personnel over the performance of controls related to the sales process. While there can be no assurance that our efforts will be successful, management is committed to the remediation of the material weakness. If we are unable to remediate the material weakness or otherwise unable to maintain
effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
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 conclude that the Company’s internal controls are effective.
Labor disputes could disrupt the Company’s ability to serve its customers and/or lead to higher labor costs.
The Company has approximately 550 employees who are covered by a collective bargaining agreement and approximately 2,250 employees who are not represented by unions or covered by collective bargaining agreements. Various unions periodically seek to organize certain departments and/or locations of the Company’s nonunion employees. Union 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 could have material adverse effects on the Company’s labor costs, productivity and flexibility.
Increases in healthcare, pension, and other costs under the Company’s benefit plans could adversely affect our financial condition and results of operations.
We provide single employer and multiemployer health, defined benefit pension and defined contribution benefits to many of our employees. The costs of such benefits continue to increase, and the extent of any increase depends on a number of different factors, many of which are beyond our control. These factors include governmental regulations such as The Patient Protection and Affordable Care Act, which resulted in changes to the U.S. healthcare system and impose mandatory types of coverage, reporting and other requirements; return on plan assets; changes in actuarial valuations, estimates, or assumptions used to determine our benefit obligations for certain benefit plans, which require the use of significant estimates, including the discount rate, expected long-term rate of return on plan assets, mortality rates and the rates of increase in compensation and healthcare costs; for multiemployer plans, the outcome of collective bargaining and actions taken by trustees who manage the plans; and potential changes to applicable legislation or regulation.
The Company has various health plans that cover eligible employees, including a self-insured group health plan, workers compensation, and auto coverage which contain certain stop-loss provisions. While we endeavor to purchase insurance coverage appropriate to our risk assessment, we are unable to predict with certainty the frequency, nature or magnitude of claims. Our business may be adversely impacted if our insurance proves to be inadequate. In addition, claims associated with risks we have retained through our self-insurance may exceed our recorded liabilities which could negatively impact future earnings. Accrued health insurance for both known claims and an estimated amount of claims incurred but not reported was $1.8 million and $1.1 million, as of December 31, 2022 and 2021, respectively. Also, if there are significant increases in healthcare costs, the premiums paid by the Company could adversely affect the Company's financial condition and results of operations. Health benefit plan expenses, including benefits paid and insurance premiums, totaled approximately $25.6 million, $21.3 million, and $15.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. If we are unable to control these benefits and costs, we may experience increased operating costs, which may adversely affect our financial condition and results of operations.
Risk Related to the Company’s Acquisitions, Growth, and Integration
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 experience integration and consolidation risks.
An important element of the Company’s growth strategy is to selectively pursue, on an opportunistic basis, acquisitions of additional businesses, in particular 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 or upon advantageous terms and conditions.
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 acquires could have a material adverse effect on the Company’s business, financial condition and 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;
•the retention or transition of existing customers and vendors;
•the integration of corporate cultures and maintenance of employee morale;
•inability to maintain and increase competitive presence;
•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;
•impairment of goodwill or other acquisition-related intangible assets;
•integration of financial reporting, treasury, 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 and make it more difficult for the Company to grow its business.
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 and results of operations, which could decrease the Company’s profitability and make it more difficult for the Company to grow its business.
The Company may not be able to successfully or profitably launch its commercial electric vehicle and hydrogen related businesses.
With our existing expertise in sales and service of electro-mobility, we have elected to pursue the strategic opportunity to leverage our knowledge to meet the growing demand for commercial electric vehicles and deliver world-class service to commercial electric vehicle customers within our existing territories. Accordingly, the Company has recently entered into a dealer agreement with Nikola Corporation to become the authorized dealer to sell and service Nikola medium and long-haul class 8 electric vehicle trucks in the New York, New Jersey, eastern Pennsylvania and New England markets. This strategic opportunity requires us to devote certain resources, including the time and attention of management. Failure to execute on our strategic plan associated with commercial electric vehicle business model or a failure of the Company, or Nikola, to successfully capitalize on the transition of long-haul trucking to battery electric and fuel cell powered vehicles could cause a diversion of management’s attention and have a material adverse effect on the Company’s business, financial condition and results of operations, which could decrease the Company’s profitability and make it more difficult for the Company to grow its business. In an effort related to accelerating the adoption of zero- emissions commercial electric vehicles and lift trucks, the Company is also in the process of investing in a hydrogen gas production plant, as compressed hydrogen gas powers hydrogen fuel cells for several of our current lift truck customers. Hydrogen gas will also power Nikola’s fuel cell electric vehicle in the future. To the extent we are unable to execute on our plan to produce and sell hydrogen
gas to our customers, or the adoption of hydrogen consuming vehicles and lift trucks in the marketplace does not develop, it could have an adverse effect on the Company’s profitability and make it more difficult for the Company to grow its business.
If we determine that our goodwill or other intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.
At December 31, 2022, we had $69.2 million of goodwill and $60.7 million of other intangible assets on our Consolidated Balance Sheets. Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations. We assess potential impairment of our goodwill and other intangible assets at least annually. Impairment may result from significant changes in the manner of use of the acquired assets, negative industry or economic trends, and/or significant underperformance relative to historic or projected operating results. For a discussion of our goodwill and long-lived assets impairment testing, see “Evaluation of Goodwill Impairment” and "Evaluation of Long-lived Asset Impairment (excluding goodwill)" in Note 2, Summary of Significant Accounting Policies.
Financial Risk and Risk Related to our Indebtedness
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:
•increasing the Company’s vulnerability to general adverse economic, industry, and competitive conditions;
•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
•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, service debt, and capital expenditures. The Company’s business may not generate sufficient cash flow from operations in the future, which could result in the Company being unable to repay indebtedness or to fund other liquidity needs.
The Company may not be able to generate sufficient cash flow 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, economic, legislative, regulatory 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.
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 business activities and capital expenditures, sell assets or operations, seek additional capital or restructure or refinance all or a portion of its indebtedness. The Company cannot make any assurances that it will be able to accomplish any of these alternatives on a timely basis or on satisfactory terms or at all, or that these actions would enable us to continue to satisfy our capital requirements. In addition, our existing debt agreements, as well as any future debt agreements, contain or may contain restrictive covenants, which may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt.
The agreements governing credit facilities may 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, may restrict or limit the Company and its subsidiaries’ ability to:
•incur more debt;
•pay dividends (including dividends on preferred and common stock) and make distributions;
•make acquisitions or investments;
•repurchase stock;
•create liens;
•enter into transactions with affiliates;
•enter into sale and lease-back transactions;
•merge or consolidate; and
•transfer and sell assets.
Events beyond the Company’s control may also affect its ability 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 adversely affected if it is unable to obtain additional capital as required and could result 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 to repay or refinance 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.
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 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.
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 to fund business operations 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.
Risk Related to Our Series A Preferred Stock and Depositary Shares
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 priority 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) 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 with respect to 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.
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 by a number of factors, including the other risks identified herein. 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. Our businesses may not generate sufficient cash flow from operations or future borrowings may not be available to us in an amount sufficient to enable us to fund our liquidity needs and make dividends on the Series A Preferred Stock.
Our depositary shares representing interests in the Series A Preferred Stock have extremely limited voting rights.
The voting rights of holders of our depositary shares are 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 included in the certificate of designations for the Series A Preferred Stock and the agreement creating the depositary shares, holders of depositary shares will not have any voting rights.
Legal and Regulatory Risks Related to the Company’s Operations
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 and 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.
The Company has operations throughout the U.S. and Canada and purchases from Europe 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 66 branch locations in the U.S. are located in 14 different states, which exposes it to different federal, state, and local regulations and taxation. The Company also has five locations throughout Canada and acquires inventory from Europe which exposes to foreign regulations and taxation as well. These laws and requirements address multiple aspects of the Company’s operations, such as worker safety, consumer rights, privacy, employee benefits, taxation, securities law compliance and more, and can often have different requirements in different jurisdictions. Changes in these requirements, or any material failure by the Company to comply with them, could increase the Company’s costs, affect its reputation, limit its business, consume management’s time and attention or otherwise generally impact its operations and financial results in adverse ways.
The Company could be adversely affected by environmental and safety requirements which could force it to use significant capital resources, increase operational costs and/or 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 batteries, 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.
In the future, federal, state, or local governments could enact new or more stringent laws or issue new or more stringent regulations concerning environmental and worker health and safety matters or effect a change in their enforcement of existing laws or regulations, that could affect our operations. There can be no assurance that we, or various environmental regulatory agencies, will not discover previously unknown environmental non-compliance or contamination, for which we could be held liable. It is possible that changes in environmental and worker health and safety laws or liabilities from newly discovered non-compliance or contamination could have a material adverse effect on our business, financial condition and results of operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
As of December 31, 2022, we leased substantially all of our facilities used in our operations. These leases are generally with terms ranging from month-to-month at some locations to an expiration date in 2037 and are typically structured to include renewal options at our election. We believe that our properties, taken as a whole, are in good operating condition, are suitable and adequate for our current business operations, and that additional or alternative space will be available on commercially reasonable terms for future use and expansion. The number of locations in each state, territory, province or country is shown in the table below, as is the number of locations that are in our Material Handling (MH), Construction (CE), and Corporate and Other (OTH) segments. Some locations contain operations in multiple segments but are listed as separate locations below.
United States
Arizona (OTH 1)
Massachusetts (MH 4, CE 3)
New York (MH 9, CE 3, OTH 1)
Connecticut (MH 1)
Maine (MH 1, CE 1)
Ohio (CE 2, OTH 1)
Florida (CE 8)
Michigan (MH 10, CE 11, OTH 1)
Vermont (MH 1)
Illinois (MH 4, CE 5)
Nevada (OTH 1)
Virginia (MH 1)
Indiana (MH 2, CE 1)
New Hampshire (MH 1, CE 2)
Canada
Quebec (MH 1)
Ontario (MH 3, OTH 1)

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
Other than routine legal proceedings incident to our business, there are no material legal proceedings to which we are a party or to which any of our property is subject.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common and Preferred Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “ALTG.” Our depositary shares are traded on the NYSE under the symbol “ALTG PR A”.
Holders
As of March 6, 2023, there were 13 active holders of record of our common stock and 1 active holder of record of our depositary shares.
Dividends
In 2022, we paid $3.0 million in cash dividends on our preferred stock. The Series A Preferred Stock underlying our depositary shares accrues a dividend equivalent to $2,500 per share of preferred stock, or $2.50 per depositary share.
We paid and declared $3.7 million in cash dividends on our common stock in 2022.
The payment of cash dividends in the future including payment of accrued dividends related to the depositary shares, will be dependent upon our revenues and earnings, capital requirements, and general financial condition. The payment of any cash dividends is within the discretion of our Board of Directors.
Securities Authorized for Issuance Under Equity Compensation Plans
The information called for by this item regarding equity compensation plans is incorporated by reference to Part III, Item 12 of this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings
We issued 212,400 shares during the year ended December 31, 2022 that were not registered under the Securities Act and that have not otherwise been described in a Quarterly Report on Form 10-Q or a Periodic Report on Form 8-K. These shares were used as consideration in connection with the purchase of Ecoverse.
Securities Repurchases
On July 6, 2022 the Company's Board approved a share repurchase program authorizing Alta to repurchase shares of its common stock for an aggregate purchase price of not more than $12.5 million. The share repurchase program is in accordance with Rule 10b-18 of the Exchange Act. Subject to applicable rules and regulations, the Company intends to repurchase shares of its common stock from time-to-time in the open market or by negotiated transactions. Such purchases will be at times and in amounts as the Company deems appropriate, based on market conditions, cash reserves, cash flow and the balancing of uses of cash for operations, growth, and share repurchase. The amount and timing of repurchases will be based on a variety of factors, including stock acquisition price, regulatory limitations and other market and economic factors. No limit was placed on the duration of the repurchase program. The stock repurchase program does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase program at any time.
On December 15, 2022, as part of the share repurchase policy, the Company entered into a trading plan with an independent broker in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. The 10b5-1 trading plan is subject to price, market volume, and timing restrictions.
No shares were repurchased during fiscal year 2022. The Company has $12.5 million of remaining authorization as of December 31, 2022.
In 2022, our stockholders approved an ESPP which is expected become effective in 2023 authorizing up to 325,000 shares of common stock to be issued and purchased by employees of the Company through payroll deductions. The authorized number of shares is subject to adjustment as provided for in the ESPP.
Performance Graph
The following graph compares the performance of the Company's common stock since our initial public offering with that of the Standard & Poor’s 500 Index ("S&P 500") as well as Russell 2000 Index based on currently available data.
The Performance Graph comparison assumes $100 was invested in our common stock and in each of the other indices described above on February 14, 2020 and all dividends have been reinvested.
Ticker
2/14/2020
12/31/2020
12/31/2021
12/31/2022
Alta Equipment Group
ALTG
100.00
95.18
141.04
128.19
S&P 500
SPY
100.00
112.85
145.29
118.89
Russell 2000
RUT
100.00
117.02
133.05
104.37

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. 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 annual report. 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 and 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 annual report, 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.
Strategic Acquisitions in 2022
Our growth strategy is predicated on making strategic acquisitions that expand our geographic reach, broaden our capabilities and service offerings and diversify our customer and supplier bases. We believe these acquisitions, both immediately and over the long-term will be accretive to our financial performance. In Q3 and Q4 of 2022, we acquired Yale Industrial Trucks Inc. ("YIT") and Ecoverse, respectively. The YIT acquisition expands our Material Handling segment internationally into the major metropolitan markets of Toronto and Montreal. The Ecoverse acquisition represents our entrance into the master dealer distribution business as we now have master dealer rights in the United States and Canada for several best-in-class environmental processing equipment OEMs.
Supply Chain Disruptions
Our industry continues to be unfavorably impacted by equipment supply chain constraints leading to shortages across construction and material handling equipment categories and limiting our collective ability to meet customer demand and potentially increase our market share. We continued to experience supply chain disruptions related to our ability to take delivery of new equipment from our OEMs during 2022 however, the supply chain constraints began to abate during the second half of 2022, resulting in an increase in our new equipment inventory relative to prior periods. Importantly, the broader supply chains issues that have impacted new equipment availability has not negatively impacted our ability to source replacement parts for our service operation, as our OEMs have prioritized the production and delivery of replacement parts to dealers. Should the new equipment supply chain issues continue for an extended period of time or worsen, the impact on our distribution could have an adverse effect on our results of operations, financial condition, and cash flows. Management continues to monitor and evaluate all of these factors and the related impacts on our business and operations, and we are diligently working to minimize the equipment supply chain impacts to our business and to our customers.
Business Description and Segments
For detailed description of our business and segments, refer to Part I, Item 1, Business, and Note 19, Segments, respectively.
Financial Statement Overview
Our revenues are primarily derived from the sale or rental of equipment and product support (e.g., parts and service) related activities, and consist of:
New Equipment Sales. We sell new heavy construction, material handling and environmental processing equipment and are a leading regional distributor for many nationally recognized equipment manufacturers. 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 from a gross margin perspective, 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 and services related to our material handling equipment offerings which include, but are not limited to, automated equipment and related installation, warehouse systems integration solutions and related controls software.
Used Equipment Sales. We sell used equipment which is typically equipment that has been taken in on trade from a customer that is purchasing new equipment, equipment coming off a third-party lease arrangement where we purchase the equipment from the finance company, or used equipment that is sourced for our customers in the open market by our used equipment specialists. Used equipment sales in our territories, like new equipment sales, generate parts and services business for the Company.
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 OEMs with which we have exclusive dealership agreements to sell new equipment.
Service Support. We provide maintenance and repair services for customer-owned equipment and we maintain our own rental fleet. In addition to repair and maintenance on an as needed or scheduled basis, we provide ongoing preventative maintenance services and warranty repairs for our customers. We have committed substantial resources to training our technical service employees and have a full-scale service infrastructure that we believe differentiates us from our competitors. Approximately 40% of our employees are skilled service technicians.
Equipment Rentals. We rent heavy construction, compact, aerial, material handling and a variety of other types of equipment to our customers on a daily, weekly and monthly basis. Our rental fleet, which is well-maintained, has an original acquisition cost (which we define as the cost originally paid to manufacturers plus any capitalized costs) of $504.6 million as of December 31, 2022. The original acquisition cost of our rental fleet excludes the $11.8 million of assets associated with our guaranteed purchase obligations, which are assets that are not in our day-to-day operational control. In addition to being a core business, our rental business also creates cross-selling opportunities for us in our sales and product support activities.
Rental Equipment Sales. We also sell rental equipment from our rental fleet. Customers often have options to purchase equipment after or before rental agreements have matured. Rental equipment sales, like new and used equipment sales, generate customer-based equipment field population within our territories and ultimately yield high-margin parts and services revenue for us.
Principal Costs and Expenses
Our cost of revenues are primarily related to the costs associated with the sale or rental of equipment and product support activities, which includes direct labor costs for our skilled technicians. Our operating expenses consist principally of selling, general and administrative expenses, which primarily includes personnel costs associated with our sales and administrative staff and expenses
associated with the deployment of our service vehicle fleet and occupancy expenses. In addition, we have interest expense related to our floorplan payables, finance leases, line of credit, and secured second lien notes. These principal costs and expenses are described further below:
New Equipment Sales. Cost of new equipment sold primarily consists of the equipment cost of the new equipment that is sold, net of any amount of credit given to the customer from trade-ins of used equipment.
Used Equipment Sales. Cost of used equipment sold consists of the net book value, or cost, of used equipment we purchase from third parties or the trade-in value of used equipment that we obtain from customers in new equipment sales transactions.
Parts Sales. Cost of parts sales represents the net book value, or cost, of parts used in the maintenance and repair of customer-owned equipment we service or parts sold directly to customers for their owned equipment (e.g., over-the-counter parts).
Services Revenue. Cost of services revenues represents, primarily, the labor costs attributable to services provided for the maintenance and repair of customer-owned equipment. 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.
Rental Revenue. Rental expense represents the costs associated with rental equipment, including, among other things, the cost of repairing and maintaining our rental equipment and other miscellaneous costs of owning rental equipment. Other rental expenses consist primarily of equipment support activities that we provide our customers in connection with renting equipment, such as freight services and damage waiver policies.
Rental Depreciation. Depreciation of rental equipment represents the depreciation costs attributable to rental equipment. See Note 2, Summary of Significant Accounting Policies, for information on our rental equipment depreciation methods.
Rental Equipment Sales. Cost of previously rented equipment sold consists of the net book value (i.e., net of accumulated depreciation) of rental equipment sold from our rental fleet.
General and Administrative Expenses. These costs are comprised of three main components: personnel, operational and occupancy costs. Personnel costs are comprised of hourly and salaried wages for administrative employees, including incentive compensation, and employee benefits, including medical benefits. Operational costs include marketing activities, costs associated with deploying and leasing our service vehicle fleet, insurance, IT, office and shop supplies, general corporate costs, depreciation on non-sales and rental related assets and intangible amortization. Occupancy costs are comprised of all expenses related to our facility infrastructure, including rent, utilities, property taxes and building insurance.
Other Income (Expense). This section of the Consolidated Statement of Operations is mostly comprised of interest expense and other miscellaneous items that result in income or expense. Interest expense is mostly driven by our OEM floorplan financing arrangements, a working capital line of credit, our second lien secured notes and our finance lease arrangements. Also included in this section of the financials are non-recurring costs, in particular expenses associated with the extinguishment of debt in 2021 and 2020.
Results of Operations
Years ended December 31, 2022 and 2021
Consolidated Results
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
Revenues:
New and used equipment sales
$
817.2
$
568.8
$
248.4
43.7
%
Parts sales
234.8
178.5
56.3
31.5
%
Service revenue
206.6
165.5
41.1
24.8
%
Rental revenue
180.1
155.5
24.6
15.8
%
Rental equipment sales
133.1
144.5
(11.4
)
(7.9
)%
Total revenues
$
1,571.8
$
1,212.8
$
359.0
29.6
%
Cost of revenues:
New and used equipment sales
$
683.2
$
478.0
$
205.2
42.9
%
Parts sales
157.4
123.4
34.0
27.6
%
Service revenue
90.7
68.2
22.5
33.0
%
Rental revenue
22.4
20.6
1.8
8.7
%
Rental depreciation
95.5
85.3
10.2
12.0
%
Rental equipment sales
103.0
122.9
(19.9
)
(16.2
)%
Cost of revenues
$
1,152.2
$
898.4
$
253.8
28.3
%
Gross profit
$
419.6
$
314.4
$
105.2
33.5
%
General and administrative expenses
$
362.3
$
285.9
$
76.4
26.7
%
Depreciation and amortization expense
16.5
10.5
6.0
57.1
%
Total general and administrative expenses
$
378.8
$
296.4
$
82.4
27.8
%
Income from operations
$
40.8
$
18.0
$
22.8
126.7
%
Other (expense) income:
Interest expense, floor plan payable - new equipment
$
(2.7
)
$
(1.7
)
$
(1.0
)
58.8
%
Interest expense - other
(29.1
)
(22.3
)
(6.8
)
30.5
%
Other income
1.6
0.7
0.9
128.6
%
Loss on extinguishment of debt
-
(11.9
)
11.9
(100.0
)%
Total other expense
$
(30.2
)
$
(35.2
)
$
5.0
(14.2
)%
Income (loss) before taxes
$
10.6
$
(17.2
)
$
27.8
(161.6
)%
Income tax provision
1.3
3.6
(2.3
)
(63.9
)%
Net income (loss)
$
9.3
$
(20.8
)
$
30.1
(144.7
)%
Preferred stock dividends
(3.0
)
(2.6
)
(0.4
)
15.4
%
Net income (loss) available to common stockholders
$
6.3
$
(23.4
)
$
29.7
(126.9
)%
Percent of Revenue
Consolidated
Year Ended December 31,
Revenues:
New and used equipment sales
52.0
%
46.9
%
Parts sales
14.9
%
14.7
%
Service revenue
13.1
%
13.7
%
Rental revenue
11.5
%
12.8
%
Rental equipment sales
8.5
%
11.9
%
Total revenues
100.0
%
100.0
%
Cost of revenues:
New and used equipment sales
43.5
%
39.5
%
Parts sales
10.0
%
10.2
%
Service revenue
5.8
%
5.6
%
Rental revenue
1.4
%
1.7
%
Rental depreciation
6.0
%
7.0
%
Rental equipment sales
6.6
%
10.1
%
Cost of revenues
73.3
%
74.1
%
Gross profit
26.7
%
25.9
%
Non-GAAP Financial Measure: Organic Revenue Growth
Organic Revenue
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
Total revenues
$
1,571.8
$
1,212.8
$
359.0
29.6
%
Acquisitions revenues
174.9
9.8
Organic revenues:
New and used equipment sales
$
715.2
$
566.3
$
148.9
26.3
%
Parts sales
203.4
176.4
27.0
15.3
%
Service revenue
182.6
163.3
19.3
11.8
%
Rental revenue
170.9
155.0
15.9
10.3
%
Rental equipment sales
124.8
142.0
(17.2
)
(12.1
)%
Total organic revenues
$
1,396.9
$
1,203.0
$
193.9
16.1
%
The above table contains a non-GAAP financial measure. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the consolidated statements of income, balance sheets or statements of cash flows of the company. The non-GAAP financial measure used is organic revenue and growth rates associated with organic revenue. Pursuant to the requirements of Regulation G, we have provided a reconciliation of organic revenue to the most directly comparable GAAP financial measure in the table above and in subsequent tables in management's discussion and analysis of our individual business segments. This measure is supplemental to, and should be used in conjunction with, the most comparable GAAP measure. Management uses this non-GAAP financial measure to monitor and evaluate financial results and trends.
We define organic revenue growth as revenue growth excluding the impact of acquisitions that do not appear fully in both periods in the current and prior years. We believe organic revenue growth is a meaningful metric to investors as it provides a more consistent comparison of our revenues to prior periods as well as to industry peers.
Revenues: Consolidated revenues increased by $359.0 million, or 29.6%, to $1,571.8 million for the year ended December 31, 2022 as compared to the same period last year. Organic revenue growth in the year ended December 31, 2022 increased 16.1% compared to the same period last year. In summary, we have experienced a high level of market demand for our products and services in a supply and labor constrained environment and in certain regions we have taken market share from our competitors. These conditions and our market performance have led to a year-to-date organic revenue increase of 26.3% in new and used equipment sales, a 13.6% organic revenue increase in our combined parts and service product support departments, and a 10.3% organic increase in rental revenue, which is a result of a larger fleet in 2022 and both higher physical utilization and rental rates when compared to 2021. Rental equipment sales declined for the year ended December 31, 2022 as compared to the same period last year as we strategically balance the decision to retain fleet, given OEM new equipment supply chain challenges, to benefit from the elevated utilization and rental rate environment but still accommodate sales into our territories to bolster field population for longer-term returns in our product support departments. On a consolidated basis, we realized an organic increase of $193.9 million for the year ended December 31, 2022, as compared to the same period last year.
Gross profit (GP):
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
Consolidated
GP%
GP%
GP%
New and used equipment sales
16.4
%
16.0
%
0.4
%
Parts sales
33.0
%
30.9
%
2.1
%
Service revenue
56.1
%
58.8
%
(2.7
)%
Rental revenue
34.5
%
31.9
%
2.6
%
Rental equipment sales
22.6
%
14.9
%
7.7
%
Consolidated gross profit
26.7
%
25.9
%
0.8
%
Consolidated gross profit increased by 80 basis points from 25.9% in the year ended December 31, 2021 to 26.7% over the same period in 2022. New and used equipment sales margins increased 40 basis points to 16.4%, reflecting our focus on providing more customized equipment solutions which yield a higher gross margin versus commodity products, and a favorable equipment pricing environment when compared to the same period last year. The favorable pricing environment also contributed to a 770 basis points increase in rental equipment sales margin when comparing the year over year periods. Parts sales margins modestly improved year over year amid high demand for equipment replacement parts on an aging field population. We realized a 260 basis points increase in rental revenue gross margin for the year ended December 31, 2022 largely as a result of improved physical utilization of the rental fleet and a rising rental rate environment when compared to the same period last year. Additionally, service gross margins decreased 270 basis points year over year primarily related to an increase in non-billable costs of our technicians which include training, paid time off, unreimbursed travel time to customers, and a reduction of OEM reimbursement rates on warranty and fleet repairs which has led to incremental warranty write-offs. Additionally, service margins were partially impacted due to a year-over-year labor cost allocation change in our Material Handling segment, which impacted reporting for a portion of 2021. This allocation change is described further in the Material Handling Results section below.
General and administrative expenses: Consolidated general and administrative (“G&A”) expenses increased by 27.8% to $378.8 million for the year ended December 31, 2022 compared to the same period last year, driven by the full period impact from our 2021 acquisitions, incremental costs from our 2022 acquisitions, as well as increases in operating input costs such as vehicles, fuel, and technician supplies, and an increase in certain sales-based expenses such as sales commissions and marketing expenditures which supported the large increase in equipment sales year over year. Further, employment costs such as wages and benefits increased due to the overall growth of our employee headcount compounded by inflationary labor market factors.
Other (expense) income: Consolidated other expense for the year ended December 31, 2022 was $30.2 million compared to $35.2 million for the year ended December 31, 2021. The decrease is primarily due to the loss on debt extinguishment in the second quarter of 2021 of $11.9 million that did not recur in 2022 partially offset by an increase in interest expense due to higher rates on our variable rate debt and more debt outstanding due to acquisitions and increasing inventory levels.
Provision (benefit) for income taxes: The Company recorded an income tax provision of $1.3 million and $3.6 million for the years ended December 31, 2022 and 2021, respectively, primarily due to income in the current year that cannot be fully offset with net operating losses and establishing a full valuation allowance against our deferred tax asset in 2021.
Material Handling Results
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
Revenues:
New and used equipment sales
$
305.2
$
258.3
$
46.9
18.2
%
Parts sales
84.4
65.4
19.0
29.1
%
Service revenue
112.1
94.6
17.5
18.5
%
Rental revenue
63.5
48.4
15.1
31.2
%
Rental equipment sales
5.5
0.8
4.7
587.5
%
Total revenues
$
570.7
$
467.5
$
103.2
22.1
%
Cost of revenues:
New and used equipment sales
$
242.9
$
205.2
$
37.7
18.4
%
Parts sales
52.8
42.5
10.3
24.2
%
Service revenue
49.5
37.5
12.0
32.0
%
Rental revenue
6.1
6.2
(0.1
)
(1.6
)%
Rental depreciation
19.6
14.2
5.4
38.0
%
Rental equipment sales
3.3
0.7
2.6
371.4
%
Cost of revenues
$
374.2
$
306.3
$
67.9
22.2
%
Gross profit
$
196.5
$
161.2
$
35.3
21.9
%
General and administrative expenses
$
164.9
$
140.7
$
24.2
17.2
%
Depreciation and amortization expense
7.2
5.1
2.1
41.2
%
Total general and administrative expenses
$
172.1
$
145.8
$
26.3
18.0
%
Income from operations
$
24.4
$
15.4
$
9.0
58.4
%
Other (expense) income:
Interest expense, floor plan payable - new equipment
$
(1.2
)
$
(0.6
)
$
(0.6
)
100.0
%
Interest expense - other
(10.5
)
(7.6
)
(2.9
)
38.2
%
Other income
4.4
3.0
1.4
46.7
%
Total other expense
$
(7.3
)
$
(5.2
)
$
(2.1
)
40.4
%
Income before taxes
$
17.1
$
10.2
$
6.9
67.6
%
Percent of Revenue
Material Handling
Year Ended December 31,
Revenues:
New and used equipment sales
53.5
%
55.2
%
Parts sales
14.8
%
14.0
%
Service revenue
19.6
%
20.2
%
Rental revenue
11.1
%
10.4
%
Rental equipment sales
1.0
%
0.2
%
Total revenues
100.0
%
100.0
%
Cost of revenues:
New and used equipment sales
42.6
%
44.0
%
Parts sales
9.3
%
9.1
%
Service revenue
8.7
%
8.0
%
Rental revenue
1.1
%
1.3
%
Rental depreciation
3.3
%
3.0
%
Rental equipment sales
0.6
%
0.1
%
Cost of revenues
65.6
%
65.5
%
Gross profit
34.4
%
34.5
%
Organic Revenue
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
Total revenues
$
570.7
$
467.5
$
103.2
22.1
%
Acquisitions revenues
28.4
2.1
Organic revenues:
New and used equipment sales
$
295.0
$
257.1
$
37.9
14.7
%
Parts sales
79.4
65.3
14.1
21.6
%
Service revenue
104.8
93.8
11.0
11.7
%
Rental revenue
58.7
48.4
10.3
21.3
%
Rental equipment sales
4.4
0.8
3.6
450.0
%
Total organic revenues
$
542.3
$
465.4
$
76.9
16.5
%
Revenues: Material Handling segment revenues increased by $103.2 million to $570.7 million for the year ended December 31, 2022 as compared to the same period last year. Organically, the segment revenues increased 16.5% for the year ended December 31, 2022 over the same period in the prior year based on strong customer demand, a favorable pricing environment and our OEMs ability to produce and deliver more new equipment in 2022 versus 2021. Importantly, product support revenues increased 15.8%, and rental revenue increased 21.3%, on an organic basis, for the year ended December 31, 2022 as compared to the same period last year. The organic increase in rental revenues year over year is primarily attributable to a larger rental fleet and increases in both physical fleet utilization and rental rates. Additionally, the year ended December 31, 2022 included five months of operating activity for our YIT acquisition, which closed on July 29, 2022, driving further variance between the comparable periods on an inorganic basis.
Gross profit (GP):
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
GP%
GP%
GP%
New and used equipment sales
20.4
%
20.6
%
(0.2
)%
Parts sales
37.4
%
35.0
%
2.4
%
Service revenue
55.8
%
60.4
%
(4.6
)%
Rental revenue
59.5
%
57.9
%
1.6
%
Rental equipment sales
40.0
%
12.5
%
27.5
%
Segment gross profit
34.4
%
34.5
%
(0.1
)%
Material Handling gross profit for the year ended December 31, 2022 decreased 10 basis points to 34.4% compared to the same period in 2021, remaining relatively consistent overall. While new and used equipment gross margins have remained relatively consistent year over year, we have gained 240 basis points in parts gross margin during 2022 when compared to the same period last year amid a favorable pricing environment for equipment replacement parts. The 460 basis points service margin declines for the year ended December 31, 2022, can be primarily attributed to the historic allocation of technician labor cost in our New York City-based business to general and administrative expense versus cost of labor while they operated on their legacy accounting system. On June 1, 2021, the business unit was fully integrated into our ERP platform and cost of technician labor has since been allocated to costs of sales. Secondarily, as it relates to service gross margin for the year ended December 31, 2022, we have also experienced a reduction of OEM reimbursement rates on warranty and fleet repairs which has led to incremental warranty write-offs and compression in gross margin. Lastly, for the year ended December 31, 2022, we experienced an increase in non-billable costs of our technicians which include training, paid time off, and unreimbursed travel time to customers as a percentage of service revenue when compared to the year ended December 31, 2021.
General and administrative expenses: General and administrative expenses increased by $26.3 million to $172.1 million for the year ended December 31, 2022 as compared to the same period last year mainly due to the full period impact from the 2021 acquisitions of ScottTech and Baron, and the 2022 YIT acquisition. Sales related variable costs, such as sales commissions and bonuses as well as an increase in operating input costs, as described previously, are also impacting the variance year over year.
Other (expense) income: Other expense increased by $2.1 million to $7.3 million for the year ended December 31, 2022 as compared to the same period last year. The increase is mainly related to the increase in total borrowings used to support acquisitions combined with a rise in interest rates on our variable rate debt.
Construction Equipment Results
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
Revenues:
New and used equipment sales
$
508.2
$
310.5
$
197.7
63.7
%
Parts sales
149.0
113.1
35.9
31.7
%
Service revenue
94.4
70.9
23.5
33.1
%
Rental revenue
116.6
107.1
9.5
8.9
%
Rental equipment sales
127.6
143.7
(16.1
)
(11.2
)%
Total revenues
$
995.8
$
745.3
$
250.5
33.6
%
Cost of revenues:
New and used equipment sales
$
436.7
$
272.8
$
163.9
60.1
%
Parts sales
103.7
80.9
22.8
28.2
%
Service revenue
41.2
30.7
10.5
34.2
%
Rental revenue
16.3
14.4
1.9
13.2
%
Rental depreciation
75.9
71.1
4.8
6.8
%
Rental equipment sales
99.7
122.2
(22.5
)
(18.4
)%
Cost of revenues
$
773.5
$
592.1
$
181.4
30.6
%
Gross profit
$
222.3
$
153.2
$
69.1
45.1
%
General and administrative expenses
$
178.8
$
134.6
$
44.2
32.8
%
Depreciation and amortization expense
8.7
5.4
3.3
61.1
%
Total general and administrative expenses
$
187.5
$
140.0
$
47.5
33.9
%
Income from operations
$
34.8
$
13.2
$
21.6
163.6
%
Other (expense) income:
Interest expense, floor plan payable - new equipment
$
(1.5
)
$
(1.1
)
$
(0.4
)
36.4
%
Interest expense - other
(16.2
)
(12.8
)
(3.4
)
26.6
%
Other expense
(2.9
)
(2.2
)
(0.7
)
31.8
%
Total other expense
$
(20.6
)
$
(16.1
)
$
(4.5
)
28.0
%
Income (loss) before taxes
$
14.2
$
(2.9
)
$
17.1
(589.7
)%
Percent of Revenue
Construction Equipment
Year Ended December 31,
Revenues:
New and used equipment sales
51.0
%
41.6
%
Parts sales
15.0
%
15.2
%
Service revenue
9.5
%
9.5
%
Rental revenue
11.7
%
14.4
%
Rental equipment sales
12.8
%
19.3
%
Total revenues
100.0
%
100.0
%
Cost of revenues:
New and used equipment sales
44.0
%
36.6
%
Parts sales
10.4
%
10.9
%
Service revenue
4.1
%
4.1
%
Rental revenue
1.6
%
1.9
%
Rental depreciation and amortization
7.6
%
9.5
%
Rental equipment sales
10.0
%
16.4
%
Cost of revenues
77.7
%
79.4
%
Gross profit
22.3
%
20.6
%
Organic Revenue
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
Total revenues
$
995.8
$
745.3
$
250.5
33.6
%
Acquisitions revenues
139.9
7.7
Organic revenues:
New and used equipment sales
$
421.4
$
309.2
$
112.2
36.3
%
Parts sales
124.1
111.1
13.0
11.7
%
Service revenue
77.8
69.5
8.3
11.9
%
Rental revenue
112.2
106.6
5.6
5.3
%
Rental equipment sales
120.4
141.2
(20.8
)
(14.7
)%
Total organic revenues
$
855.9
$
737.6
$
118.3
16.0
%
Revenues: Construction equipment segment revenues increased by 33.6% to $995.8 million for the year ended December 31, 2022 as compared to the same period last year. Organically, the segment revenues increased 16.0% year over year based on strong customer demand, a favorable pricing environment and our OEMs ability to produce and deliver more new equipment in 2022 versus 2021. Importantly, product support revenues increased 11.8%, and rental revenue increased 5.3%, on an organic basis, for the year ended December 31, 2022 as compared to the same period last year. While we effectively held the gross book value of the rental fleet in the construction segment constant in 2022 when compared to 2021, we were able to organically increase rental revenues for the year ended December 31, 2022 primarily due to increases in rental rates year over year. Rental equipment sales declined for the year ended December 31, 2022 as compared to the same period last year as we strategically balance the decision to retain fleet, given OEM new equipment supply chain challenges, to benefit from the elevated utilization and rental rate environment but still accommodate sales into our territories to bolster field population for longer-term returns in our product support departments.
Gross profit (GP):
Year Ended December 31,
Increase (Decrease)
2022 versus 2021
GP%
GP%
GP%
New and used equipment sales
14.1
%
12.1
%
2.0
%
Parts sales
30.4
%
28.5
%
1.9
%
Service revenue
56.4
%
56.7
%
(0.3
)%
Rental revenue
20.9
%
20.2
%
0.7
%
Rental equipment sales
21.9
%
15.0
%
6.9
%
Segment gross profit
22.3
%
20.6
%
1.7
%
Construction equipment gross profit increased by 170 basis points to 22.3% for the year ended December 31, 2022, from 20.6% compared to the same period in 2021, with overall margin improvements reflective of the general business climate and demand factors of the industry. Specifically, new and used equipment sales margins increased 200 basis points to 14.1%, primarily related to a favorable equipment pricing environment and revenue mix being more weighted to higher margin equipment types when compared to the same period last year. These factors also led to a 690 basis points increase in rental equipment sales margin when comparing the periods year over year. Parts sales margins are modestly improved year over year amid a favorable pricing environment for equipment replacement parts. Rental revenue gross margin for the year ended December 31, 2022 was moderately improved from the same period last year due to higher rental rates. Service gross margins reduced slightly year over year primarily related to an increase in non-billable costs of our technicians which include training, paid time off and unreimbursed travel time to customers and a reduction of OEM reimbursement rates on warranty and fleet repairs which has led to excess warranty write-offs.
General and administrative expenses: General and administrative expenses increased by 33.9% to $187.5 million for the year ended December 31, 2022 as compared to the same period in 2021, mainly due to the influence of our acquired companies’ impact on the current period and increases in operating input costs, such as vehicles, fuel and technician shop supplies, and an increase in certain sales-related expenses such as sales commissions and marketing expenditures, which supported the large increase in new and used equipment sales for the year. Additionally, we realized increases in personnel costs such as wages, bonuses, and employer-sponsored benefits, a result of inflationary factors and general headcount increases in the segment.
Other (expense) income: Other expense increased by $4.5 million to $20.6 million for the year ended December 31, 2022 as compared to the same period in 2021 primarily due to the increase in interest rates on our variable rate debt and the interest expense related to the financing of our 2021 acquisitions, as the acquisitions were financed through our line of credit and floorplan financing facilities.
Liquidity and Capital Resources
Year ended December 31, 2022, 2021 Cash Flows
Cash Flow from Operating Activities. Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. For the year ended December 31, 2022, operating activities resulted in net cash provided by operations of $26.0 million. Our cash flows from operating activities related to net income adjusted for non-cash income and expenses, primarily gain on sale of rental fleet and depreciation and amortization, generated $101.0 million for the year ended December 31, 2022. This metric increased $23.7 million for the year end December 31, 2022 when compared to the same period last year, primarily due to the increase in income from operations year over year. This was partially offset by $75.0 million of net working capital investments.
For the year ended December 31, 2021, operating activities resulted in net cash provided by operations of $30.7 million. Our cash flows from operating activities related to net loss adjusted for non-cash income and expenses, primarily gain on sale of rental fleet and depreciation and amortization, generated $77.3 million for the year ended December 31, 2022. This was partially offset by $46.6 million of net working capital investments.
Cash Flow from Investing Activities. For the year ended December 31, 2022, our cash used in investing activities was $162.6 million. This was mainly due to $75.9 million in purchases of rental equipment, non-rental property and equipment, and equipment contracted under guaranteed purchase obligations, offset by proceeds from the sale of non-rental assets, and $86.7 million cash for the 2022 acquisitions and adjustments to the purchase prices of our 2021 acquisitions.
For the year ended December 31, 2021, our cash used in investing activities was $113.4 million. This was mainly due to $63.4 million cash used as a result of the 2021 acquisitions and $50.0 million in purchases of rental equipment, non-rental property and equipment, and equipment contracted under guaranteed purchase obligations offset by proceeds from the sale of non-rental assets.
Cash Flow from Financing Activities. For the year ended December 31, 2022, cash provided by financing activities was $136.9 million. The impact was mainly due to $118.5 million of net proceeds under our line of credit, primarily related to a draw on the line to fund the YIT and Ecoverse acquisitions, and net proceeds of $28.0 million related to floor plans with an unaffiliated source (i.e., a non-OEM vendor) to increase new equipment inventory levels and $0.7 million related to other financing activities. Inflows were partially offset by $3.6 million of payments on finance lease obligations and $6.7 million related to preferred and common stock dividend payments.
For the year ended December 31, 2021, cash provided by financing activities was $83.8 million. Net proceeds under our lines of credit and floor plans with an unaffiliated source (i.e. a non-vendor) were $59.4 million and $4.8 million, respectively. Net proceeds from issuance of notes amounted to $310.2 million. This was partially offset by payments related to the extinguishment of former debt which totaled $153.1 million, expenditures of debt issuance costs of $1.7 million, $3.8 million of payments on long term debt and finance lease obligations and promissory note and dividend payments totaling $3.6 million.
Sources of Liquidity
Our principal sources of liquidity have been from cash provided by our service, parts and rental related operations and the sales of new, used, and rental fleet equipment, proceeds from the issuance of debt, and borrowings available under our line of credit and floor plans. The Company reported $2.7 million in cash as of December 31, 2022. For more information on our available borrowings under the revolving line of credit, senior secured second lien notes, and floor plans, please refer to Note 9, Floor Plans and Note 10, Long-term Debt. We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested as we do not anticipate the need to repatriate funds to the U.S. to satisfy domestic liquidity needs.
Cash Requirements Related to Operations
Our principal uses of cash have been to fund operating activities and working capital (including new and used equipment inventories), purchases of rental fleet equipment and property and equipment, fund payments due under line of credit and floor plans payable, fund acquisitions, meet debt service requirements and funding the preferred stock and common stock dividends. In the future, we may pursue additional strategic acquisitions and seek to open new start-up locations. We anticipate that the uses described above encompass the principal demands on our cash and availability under our line of credit and floor plans in the future.
The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. Our gross rental fleet capital expenditures for the period ended December 31, 2022 were approximately $186.9 million, including $122.9 million of transfers from new and used inventory to rental fleet. This gross rental fleet capital expenditure was offset by sales proceeds of rental equipment of approximately $133.1 million for the period ended December 31, 2022 as our business model is to sell lightly used inventory to customers from our rental fleet to increase field population in our geographies. In response to changing economic conditions, we have the flexibility to modify our capital expenditures, especially as it relates to rental fleet.
To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness, will depend upon our future operating performance and the availability of borrowings under the line of credit and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash, and available borrowings under the line of credit will be adequate to meet our future liquidity needs for the foreseeable future. As of December 31, 2022, we had $264.3 million of available borrowings under the revolving line of credit and floor plans.
Critical Accounting Policies and Estimates
In the preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures. Our management reviews these estimates and assumptions on an ongoing basis. While we believe the estimates and judgments we use in preparing our consolidated financial statements are reasonable and appropriate, they are subject to future events and uncertainties regarding their outcome; therefore, actual results may materially differ from these estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts first become known. We consider the following items in the consolidated financial statements to require significant estimation or judgment. See Note 2 to our consolidated financial statements for a summary of our significant accounting policies.
Useful Lives of Property and Equipment
We depreciate rental equipment and property and equipment over their estimated useful lives. The useful life of rental equipment is determined based on our estimate of the period the asset will generate revenues. The principal methods of depreciation used are straight-line basis over the estimated useful lives or percentage of rental revenue based on the unit of activity method. We periodically review the assumptions used in calculating rates of depreciation. We may be required to change these estimates based on changes in our industry or changes in other circumstances. If these estimates change in the future, we may be required to recognize increased or decreased depreciation expense for these assets. The amount of depreciation expense we record is highly dependent upon the estimated useful lives assigned to each category of equipment and the utilization of equipment where the unit of activity method is applied.
Generally, we assign the following useful lives to the below categories of Property and Equipment:
Estimated
Useful Life
Transportation equipment (autos and trucks)
2 - 5 years
Rental fleet
5 - 10 years
Machinery and equipment excluding rental fleet
3 - 20 years
Office equipment
5 - 7 years
Computer equipment
2 - 5 years
Leasehold improvements
3 - 15 years
The useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively, if appropriate.
Acquisition Accounting
We have made significant acquisitions in the past and we intend to make additional acquisitions in the future that meet our selection criteria with an objective of increasing our revenues, improving our profitability, diversifying our end market and geographic exposure and strengthening our competitive position. The assets acquired and liabilities assumed (including contingent purchase consideration) are recorded based on their respective fair values at the date of acquisition. Such fair market value assessments require judgments and estimates that can be affected by various factors over time, which may cause final amounts to differ materially from original estimates. The significant judgments include the estimation of future cash flows, which are dependent on forecasts; the estimation of a long-term rate of growth; the estimation of the useful life over which cash flows will occur; and the determination of a risk-adjusted weighted average cost of capital. When appropriate, our estimates of the fair values of assets and liabilities acquired include assistance from independent third-party appraisal firms. The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact net income in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. As discussed below, we regularly review for impairments.
New and used equipment inventories, long-lived assets (primarily rental equipment), goodwill, and other intangible assets generally represent the largest component of our acquisitions. Inventories acquired in the transaction are valued at fair value, which approximates a market participant’s estimated selling price adjusted for (1) costs to sell and (2) a reasonable profit allowance. In addition to long-lived assets, we also acquire other assets and assume liabilities. These other assets and liabilities typically include, but are not limited to, parts inventory, accounts receivable, accounts payable, floor plans payable and other working capital items.
Because of their short-term nature, the fair values of these assets and liabilities generally approximate the carrying values reflected on the acquired entities balance sheets. However, when appropriate, we adjust these carrying values for factors such as collectability, existence, and consistency with Company accounting policies.
Pursuant to accounting standard Topic 350 - Intangibles - Goodwill and Other, we record as goodwill the excess of the consideration transferred over the fair values of the identifiable net assets acquired. The intangible assets that we have acquired consist of tradenames, non-compete agreements, supplier relationships, and customer relationships. A tradename has a fair value equal to the present value of the royalty income attributable to it. The royalty income attributable to a tradename represents the hypothetical cost savings that are derived from owning the tradename instead of paying royalties to license the tradename from another owner. The fair value of non-compete agreements is estimated based on an income approach since their values are representative of the current and future revenue and profit erosion protection they provide. Customer and supplier relationships are generally valued based on an excess earnings or income approach with consideration to projected cash flows.
Impairment of Goodwill and Long-lived Assets
Refer to Note 2, Summary of Significant Accounting Policies, herein for more information.
Revenue Recognition
Refer to Note 2, Summary of Significant Accounting Policies, and Note 3, Revenue Recognition, herein for more information.
Income Taxes
The Company operates in a number of geographic locations and is subject to foreign, U.S. federal, state, and local taxes applicable in each of the respective jurisdictions. These tax laws are complex and involve uncertainties in the application of our facts and circumstances that may be subject to interpretation. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
As a part of our income tax provision, we must also evaluate the likelihood that we will be able to realize our deferred tax assets which is dependent on our ability to generate sufficient taxable income in future years. Our deferred tax calculation requires management to make certain estimates about future operations. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not (a likelihood of greater than 50%) to be realized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. These estimates involve judgment. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. There has been no change to the assumption methodology during the current or prior period.
Allowance for Doubtful Accounts
The Company records trade accounts receivables at invoice amount less an allowance for doubtful accounts. The allowance for doubtful accounts is evaluated periodically and includes specific reserves for certain customer accounts identified as known collection problems due to insolvency, disputes or other collection issues and estimates by management based on the following assumptions and variables: the customer’s financial position, age of the customer’s receivables, and changes in payment schedules. In addition to the specific reserves, management establishes a non-specific allowance for doubtful accounts by applying specific percentages to the different receivable aging categories (excluding the specifically reserved accounts) based on the history of past write-offs and collections and current customer credit conditions. Changes in the economy or in the credit conditions of individual customers or other circumstances could require increases or decreases in our allowances. The percentage applied against the past due categories increases as the accounts become further past due. A receivable is considered past due if payments have not been received by the Company based on established customer payment terms. Generally, the Company does not accrue interest on past due receivables. Certain accounts are turned over to collection agencies, while the Company places liens and pursues a variety of other collection strategies on others. The allowance for doubtful accounts is charged with the write-off when deemed uncollectible by management. Write-offs of such receivables require management approval based on specified dollar thresholds.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our exposure to market risk primarily consists of interest rate risk associated with our variable and fixed rate debt and foreign currency risks. We employ financial instruments to manage the Company's exposure to changes in interest rates and foreign currencies. See Note 16, Fair Value of Financial Instruments, for more information.
Interest rate risk: Our earnings may be affected by changes in interest rates on the ABL Facility and Floor Plan Facilities. The interest rates applicable to any loans under the ABL Credit Facility are based, at the option of the borrowers, on (i) a floating rate based on the Secured Overnight Financing Rate (“SOFR”) (for loans denominated in U.S. dollars) or Canadian Dollar Offered Rate (for loans denominated in Canadian dollars) plus an initial margin of 1.75% or (ii) CBFR (for loans denominated in U.S. dollars) or the Canadian Prime Rate (for loans denominated in Canadian dollars) less an initial margin of 0.75%, in each case, where margin is adjusted under the ABL Credit Facility based on the quarterly average excess availability under the ABL Credit Facility. The interest rates applicable to any loans under various Floor Plan Facilities are based on a wide range of benchmark rates (including SOFR, Prime, Bloomberg Short-Term Bank Yield Index, and the Canadian Bankers' Acceptance Rate) plus an applicable margin. As of December 31, 2022, the lowest Floor Plan Rate was SOFR plus an initial margin of 2.75%, and the highest was SOFR plus an initial margin of 5.00% plus an adjustment of 0.1145% per annum.
At December 31, 2022 and December 31, 2021, we had $219.5 million and $100.7 million, respectively, outstanding borrowings under the ABL Facility. At December 31, 2022 and December 31, 2021, we had $256.9 million and $154.9 million, respectively, outstanding borrowings under the Floor Plan Facilities. As of December 31, 2022, based upon the amount of our variable rate debt outstanding, each one percentage point increase in the interest rates applicable to our variable rate debt when excluding and including the hedge impact of our interest rate cap would reduce our annual pre-tax earnings by approximately $3.2 million and $1.2 million, respectively. The amount of variable rate indebtedness outstanding may fluctuate significantly. See Note 9, Floor Plans, and Note 10, Long-Term Debt, in our consolidated financial statements for additional information concerning the terms of our variable rate debt.
We have fixed rate Notes of $315.0 million which are due in 2026. We did not have significant exposure to changing interest rates as of December 31, 2022 on the fixed rate Notes. For additional information concerning the terms of our fixed rate debt, see Note 10, Long-Term Debt.
Foreign currency risk: Due to our international operations with the acquisitions of YIT and Ecoverse, a portion of our revenues, cost of revenues, and operating expenses are subject to foreign currency exchange rate risk. Changes in the exchange rate of the U.S. dollar versus the Canadian dollar and European currencies affect the translated value and relative level of revenues and net income that we report from one period to the next. We have an economic hedge on a portion of committed foreign currency purchases to manage some of our foreign currency exposure.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure.
Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, as our principal financial and accounting officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. As a result of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2022 because of the material weakness in internal control over financial reporting described below.
Notwithstanding such material weakness in internal control over financial reporting, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our consolidated balance sheets as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, present fairly, in all material respects, our financial position, results of our operations and our cash flows for the periods presented in this Annual Report on Form 10-K, in conformity with GAAP.
Previously disclosed material weaknesses
The following are material weaknesses that were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 and have been remediated as of December 31, 2022:
•There were ineffective ITGCs in the areas of user access and segregation of duties over certain information technology (IT) systems that support the Company’s financial reporting processes. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.
•There were ineffective controls in the aggregate over parts inventory, including cycle counts, receiving controls, and monitoring of adjustments to inventory.
Throughout 2022, management has implemented measures designed to remediate the identified material weaknesses. The Company’s remediation efforts included the following:
•For the material weakness over user access and segregation of duties, we installed, customized, and tested a module within our ERP system to assist with the identification, documentation and monitoring of user access and segregation of duties conflicts. We designed and implemented controls to review the potential financial reporting effects of identified segregation of duties conflicts. Specifically, for each segregation of duties conflict within our ERP system, we determined where manual business process controls were in place and operating effectively to mitigate each conflict, and we performed detective reviews of activity logs to identify if improper user access had occurred where segregation of duties conflicts were not mitigated by manual business process controls.
•For the material weakness over parts inventory, we have enhanced and expanded the design of management’s parts inventory count program and the related controls, including management review controls over parts inventory balances and adjustments. We have developed and delivered training programs to educate personnel concerning the requirements of each control impacting parts inventory, including cycle count controls, receiving controls, and the detective review controls of parts inventory balances and adjustments.
Throughout 2022, the Company completed the testing of the design and operating effectiveness of the controls. Management has determined that the controls are adequately designed and are operating effectively and consider these material weaknesses identified in the prior year to be remediated as of December 31, 2022.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as amended. Our internal control over financial reporting includes controls and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The company’s management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management determined, based on the existence of the material weakness described below, that we did not maintain effective internal control over financial reporting.
The Company acquired Yale Industrial Trucks Inc. and Ecoverse on July 29, 2022 and November 1, 2022, respectively, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, the internal controls of the acquired companies, which represent total assets of $129.7 million (or 10% of our total assets) and total revenues of $26.4 million (or 1.7% of our total revenues) included in the consolidated financial statements of the Company as of and for the year ended December 31, 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As previously disclosed in our December 31, 2021 Annual Report on Form 10-K, we did not maintain effective controls over the sales process, including proper review and authorization of pricing and discounts, work orders, sales agreements, and rental contracts, which in the aggregate constitutes a material weakness. We believe that these control deficiencies were a result of inadequate policies and procedures over the performance of controls and lack of training around the controls over the sales process leading to the inconsistent control performance across our geographies.
The Company’s independent registered public accounting firm, Deloitte & Touche LLP, who audited the consolidated financial statements as of and for the year ended December 31, 2022 included in this Annual Report on Form 10-K issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. Deloitte & Touche LLP’s report is included herein.
2023 Remediation Plans
During 2022, we made progress towards remediation of this material weakness as we have enhanced and expanded our policies and procedures over the performance of controls around the sales process, across all lines of business, including proper review and authorization of pricing and discounts, work orders, sales agreements, and rental contracts. We have designed and implemented detective review controls to identify and address deviations from policies in a timely manner. We have developed and delivered training programs to educate personnel concerning the requirements of each control impacting the sales process.
Management is committed to the remediation of the material weakness described above. We are continuing to further refine our policies and procedures and train our personnel over the performance of controls related to the sales process. We will continue to assess the effectiveness of our remediation efforts in connection with our evaluation of internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Except for the changes in connection with our implementation of the remediation plan discussed above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Alta Equipment Group Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Alta Equipment Group Inc. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated March 9, 2023, expressed an unqualified opinion on those financial statements.
As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Yale Industrial Trucks Inc. (YIT) and Ecoverse, which were acquired on July 29, 2022 and November 1, 2022, respectively, and whose financial statements constitute $129.7 million (or 10%) of total assets and $26.4 million (or 1.7%) of total revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2022. Accordingly, our audit did not include the internal control over financial reporting at YIT and Ecoverse.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment:
The Company did not maintain effective controls over the sales process, including proper review and authorization of pricing and discounts, work orders, sales agreements, and rental contracts, which in the aggregate constitutes a material weakness.
This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2022, of the Company, and this report does not affect our report on such financial statements.
/s/ Deloitte & Touche LLP
Detroit, Michigan
March 9, 2023

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item is incorporated by reference to the applicable information in our definitive proxy statement, which will be filed no later than 120 days after the close of the fiscal year covered by this annual report.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference to the applicable information in our definitive proxy statement, which will be filed no later than 120 days after the close of the fiscal year covered by this annual report.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item is incorporated by reference to the applicable information in our definitive proxy statement, which will be filed no later than 120 days after the close of the fiscal year covered by this annual report.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference to the applicable information in our definitive proxy statement, which will be filed no later than 120 days after the close of the fiscal year covered by this annual report.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
The information required by this Item is incorporated by reference to the applicable information in our definitive proxy statement, which will be filed no later than 120 days after the close of the fiscal year covered by this annual report.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(1)Financial Statements
The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K.
(2)Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts for the Years Ended December 31, 2022, 2021 and 2020:
Changes
Balance at Beginning of Period
Charged to Expense
Other (1)
Deductions from Reserves
Balance at End of Period
Receivables allowances:
Year ended December 31, 2022
$
10.7
$
5.0
$
-
$
(2.7
)
$
13.0
Year ended December 31, 2021
7.1
4.2
-
(0.6
)
10.7
Year ended December 31, 2020
4.4
4.3
-
(1.6
)
7.1
Tax valuation allowances:
Year ended December 31, 2022
$
7.6
$
0.8
$
0.4
$
-
$
8.8
Year ended December 31, 2021
-
7.6
-
-
7.6
Year ended December 31, 2020
-
-
-
-
-
(1) Includes activities associated with change in valuation allowance from OCI.
(3)Exhibits
The Exhibits listed below are filed as part of this Annual Report on Form 10-K.
Exhibit Index
Exhibit
Number
Description
2.1
Merger Agreement, dated as of December 12, 2019, by and among B. Riley Principal Merger Corp., BR Canyon Merger Sub Corp., Alta Equipment Holdings, Inc. and Ryan Greenawalt (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on December 13, 2019).
3.1
Third Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Form 8-A (File No. 001-38864) filed by the Company on February 14, 2020).
3.2
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Form 8-A (File No. 001-38864) filed by the Company on February 14, 2020).
3.3
Certificate of Designation for 10% Series A Cumulative Perpetual Preferred Stock of Alta Equipment Group Inc. (incorporated by reference to Exhibit 3.3 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on December 22, 2020)
4.1
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Form 8-A (File No. 001- 38864) filed by the Company on February 14, 2020).
4.2
Specimen Warrant Certificate (incorporated by reference to Exhibit 4.2 of the Form 8-A (File No. 001-38864) filed by the Company on February 14, 2020).
4.3
Warrant Agreement, dated April 8, 2019, between the B. Riley Principal Merger Corp. and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 11, 2019).
4.4
Deposit Agreement, dated December 22, 2020, among Alta Equipment Group Inc., Continental Stock Transfer & Trust Company, as Depositary, and the holders of depositary receipts, with respect to Alta Equipment Group’s 10% Series A Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 4.4 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on December 22, 2020).
4.5
Form of Specimen Certificate representing the 10% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, of Alta Equipment Group Inc. (incorporated by reference to Exhibit 4.5 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on December 22, 2020).
4.6
Form of Depositary Receipt (included as Exhibit A to Exhibit 4.4) (incorporated by reference to Exhibit 4.6 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on December 22, 2020).
4.7
Indenture, dated April 1, 2021, among the Company, the Guarantors listed therein and Wilmington Trust, National Association, as trustee and as collateral agent (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 5, 2021).
4.8
Form of 5.625% Senior Secured Second Lien Notes due 2026 (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 5, 2021). Form of 5.625% Senior Secured Second Lien Notes due 2026 (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 5, 2021).
4.9
Registration Rights Agreement, dated April 8, 2019, by and among the Company, B. Riley Principal Sponsor Co., LLC and the Company’s independent directors (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 11, 2019).
4.10
Registration Rights Agreement, dated February 14, 2020, by and among the Company and Ryan Greenawalt, Robert Chiles, Anthony Colucci, Craig Brubaker, Alan Hammersley, Richard Papalia, Paul Ivankovics and Jeremy Cionca (incorporated by reference to Exhibit 10.2 of the Form 8-A (File No. 001- 38864) filed by the Company on February 14, 2020).
10.1
Sixth Amended and Restated ABL First Lien Credit Agreement, dated April 1, 2021, among Alta Equipment Group Inc., Alta Equipment Holdings, Inc., Alta Enterprises, LLC, Alta Construction Equipment Illinois, LLC, Alta Heavy Equipment Services, LLC, Alta Industrial Equipment Michigan, LLC, Alta Construction Equipment, L.L.C., Alta Industrial Equipment Company, L.L.C., NITCO, LLC, Alta Construction Equipment Florida, LLC, Alta Industrial Equipment New York, LLC, Alta Construction Equipment New York and PEAKLOGIX, LLC the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 11, 2019).
10.2
Sixth Amended and Restated Floor Plan First Lien Credit Agreement, dated February 3, 2020, among Alta Equipment Group Inc., Alta Equipment Holdings, Inc., Alta Enterprises, LLC, Alta Construction Equipment Illinois, LLC, Alta Heavy Equipment Services, LLC, Alta Industrial Equipment Michigan, LLC, Alta Construction Equipment, L.L.C., Alta Industrial Equipment Company, L.L.C., NITCO, LLC, Alta Construction Equipment Florida, LLC, Alta Industrial Equipment New York, LLC, Alta Construction Equipment New York and PEAKLOGIX, LLC the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 11, 2019).
10.3
Intercreditor Agreement, dated April 1, 2021, between JPMORGAN CHASE BANK, N.A., as Administrative Agent for the ABL First Lien Secured Parties, WILMINGTON TRUST, NATIONAL ASSOCIATION, as collateral agent for the Second Lien Secured Parties, and acknowledged by Alta Equipment Group Inc., Alta Equipment Holdings, Inc., Alta Enterprises, LLC, Alta Construction Equipment Illinois, LLC, Alta Heavy Equipment Services, LLC, Alta Industrial Equipment Michigan, LLC, Alta Construction Equipment, L.L.C., Alta Industrial Equipment Company, L.L.C., NITCO, LLC, Alta Construction Equipment Florida, LLC, Alta Industrial Equipment New York, LLC, Alta Construction Equipment New York, LLC and PEAKLOGIX, LLC (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 11, 2019).
10.4
Letter Agreement, dated April 8, 2019, by and among the Company, its officers, its directors and B. Riley Principal Sponsor Co., LLC (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 11, 2019).
10.5
Forward Purchase Agreement, dated April 8, 2019, by and between the Company and B. Riley Principal Investments, LLC (incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on April 11, 2019).
10.6
Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.6 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on February 14, 2020).
10.7
Amendment to Subscription Agreement, dated February 12, 2020, by and between the Company and B. Riley Principal Investments, LLC (incorporated by reference to Exhibit 10.7 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on February 14, 2020).
10.8
Alta Equipment Group Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Annex C to the Definitive Proxy Statement filed by the Company on January 23, 2020).
10.9
Registration Side Letter - Howell Share Consideration (incorporated by reference to Exhibit 10.12 of the Registration Statement on Form S-1 (File No. 001-38864) filed by the Company on October 26, 2020).
10.10
Underwriting Agreement, dated December 17, 2020, by and among Alta Equipment Group Inc. and B. Riley FBR, Inc., as representative of the several underwriters named therein (incorporated by reference to Exhibit 1.1 of the Current Report on Form 8-K (File No. 001-38864) filed by the Company on December 22, 2020).
10.11
Form of Restricted Stock Unit Agreement (Employee) (incorporated by reference to Exhibit 10.11 on Form 10-Q (File No. 001-38864) filed by the Company on August 9, 2022)
10.12
Form of Restricted Stock Unit Agreement (Non-Employee Director) (incorporated by reference to Exhibit 10.11 on Form 10-Q (File No. 001-38864) filed by the Company on August 9, 2022)
10.13
Form of Performance Stock Unit Agreement (incorporated by reference to Exhibit 10.11 on Form 10-Q (File No. 001-38864) filed by the Company on August 9, 2022)
10.14*
Form of 2022 Restricted Stock Unit Agreement (Employee)
13.1
December 31, 2021 Annual Report to Security Holders on Form 10-K (incorporated by reference to 10-K (File No. 001-38864) filed by the Company on March 31, 2022).
16.1*
Letter regarding change in certifying accountants.
21.1*
Subsidiaries of the Company.
23.1*
Consent of Deloitte & Touche LLP.
24.1
Powers of Attorney (included on the signature page of this Annual Report on Form 10-K).
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith.