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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

ALTA EQUIPMENT GROUP INC.

(Exact name of registrant as specified in its charter)

 

Delaware

001-38864

83-2583782

(State or other jurisdiction
of incorporation)

(Commission
File Number)

(IRS Employer
Identification No.)

 

13211 Merriman Road, Livonia, Michigan 48150

(Address of principal executive offices)

 

(248) 449-6700

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Large accelerated filer

Accelerated filer

 Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.0001 par value per share

ALTG

The New York Stock Exchange

Depositary Shares representing a 1/1000th fractional interest in a share of 10% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value per share

ALTG PRA

 

The New York Stock Exchange

 

As of May 6, 2024, there were 33,147,140 shares of Common Stock, $0.0001 par value, and 1,200 shares of Preferred Stock, $0.0001 par value, which Preferred Stock is evidenced by 1,200,000 depositary shares, outstanding.

 


 

INDEX

 

 

 

Page

PART I – FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Interim Financial Statements (Unaudited)

4

Condensed Consolidated Balance Sheets (Unaudited)

4

Condensed Consolidated Statements of Operations (Unaudited)

5

 

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

6

 

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

7

Condensed Consolidated Statements of Cash Flows (Unaudited)

8

Notes to Unaudited Condensed Consolidated Financial Statements

9

Note 1.

Organization and Nature of Operations

9

Note 2.

Summary of Significant Accounting Policies

9

Note 3.

Revenue Recognition

9

Note 4.

Related Party Transactions

11

Note 5.

Inventories

11

Note 6.

Property and Equipment

12

Note 7.

Goodwill and Other Intangible Assets

12

Note 8.

Floor Plans

13

Note 9.

Long-Term Debt

14

 

Note 10.

Leases

15

Note 11.

Contingencies

16

Note 12.

Income Taxes

17

 

Note 13.

Stock-Based Compensation

17

Note 14.

Fair Value of Financial Instruments

18

Note 15.

Business Combinations

20

 

Note 16.

Segments

20

 

Note 17.

Earnings Per Share

22

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

36

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

37

Item 6.

Exhibits

37

 

Signature

41

 

 

1


 

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this Form 10-Q may be considered “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained herein are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by any such forward-looking statements. Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may include, for example, statements about: our future financial performance; our plans for expansion and acquisitions; and changes in our strategy, future operations, financial position, estimated revenues, income or loss, projected costs, prospects, plans and objectives of management.

These forward-looking statements are based on current information available, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward-looking statements.

Some factors that could cause actual results to differ include, but are not limited to:

supply chain disruptions, inflationary pressures resulting from supply chain disruptions or a tightening labor market;
negative impacts on customer payment policies and adverse banking and governmental regulations, resulting in a potential reduction to the fair value of our assets;
the performance and financial viability of key suppliers, contractors, customers and financing sources;
economic, industry, business and political conditions including their effects on governmental policy and government actions that disrupt our supply chain or sales channels;
fluctuations in interest rates;
the market price for our equipment;
collective bargaining agreements and our relationship with our union-represented employees;
our success in identifying acquisition targets and integrating acquisitions;
our success in expanding into and doing business in additional markets;
our ability to raise capital at favorable terms;
the competitive environment for our products and services;
our ability to continue to innovate and develop new business lines;
our ability to attract and retain key personnel, including, but not limited to, skilled technicians;
our ability to maintain our listing on the New York Stock Exchange (“NYSE”);
the impact of cyber or other security threats or other disruptions to our businesses;
our ability to realize the anticipated benefits of acquisitions or divestitures, rental fleet and other organic investments or internal reorganizations;
federal, state and local government budget uncertainty, especially as it relates to infrastructure projects and taxation;
currency risks and other risks associated with international operations; and
other risks and uncertainties identified in the section entitled “Risk Factors” in our annual report on Form 10-K and other filings with the United States ("U.S.") Securities and Exchange Commission (the “SEC”).

2


 

For a discussion identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see our filings with the SEC including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, and in this Quarterly Report on Form 10-Q. The foregoing list of factors is not exclusive and undue reliance should not be placed upon any forward-looking statements, which speak only as of the date made.

3


 

PART I

Item 1. Financial Statements

ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions, except share and per share amounts)

 

March 31,
2024

 

 

December 31,
2023

 

ASSETS

 

 

 

 

 

Cash

$

5.6

 

 

$

31.0

 

Accounts receivable, net of allowances of $13.3 and $12.4 as of March 31, 2024 and December 31, 2023, respectively

 

239.4

 

 

 

249.3

 

Inventories, net

 

553.7

 

 

 

530.7

 

Prepaid expenses and other current assets

 

23.6

 

 

 

27.0

 

Total current assets

 

822.3

 

 

 

838.0

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

Property and equipment, net

 

477.0

 

 

 

464.8

 

Operating lease right-of-use assets, net

 

110.1

 

 

 

110.9

 

Goodwill

 

76.0

 

 

 

76.7

 

Other intangible assets, net

 

63.9

 

 

 

66.3

 

Other assets

 

14.0

 

 

 

14.2

 

TOTAL ASSETS

$

1,563.3

 

 

$

1,570.9

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Floor plan payable – new equipment

$

300.8

 

 

$

297.8

 

Floor plan payable – used and rental equipment

 

98.4

 

 

 

99.5

 

Current portion of long-term debt

 

8.5

 

 

 

7.7

 

Accounts payable

 

98.6

 

 

 

97.0

 

Customer deposits

 

16.2

 

 

 

17.4

 

Accrued expenses

 

52.0

 

 

 

59.7

 

Current operating lease liabilities

 

15.6

 

 

 

15.9

 

Current deferred revenue

 

14.3

 

 

 

16.2

 

Other current liabilities

 

26.7

 

 

 

23.9

 

Total current liabilities

 

631.1

 

 

 

635.1

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

Line of credit, net

 

328.6

 

 

 

315.9

 

Long-term debt, net of current portion

 

312.6

 

 

 

312.3

 

Finance lease obligations, net of current portion

 

33.2

 

 

 

31.1

 

Deferred revenue, net of current portion

 

4.0

 

 

 

4.2

 

Long-term operating lease liabilities, net of current portion

 

99.3

 

 

 

99.6

 

Deferred tax liabilities

 

7.6

 

 

 

7.7

 

Other liabilities

 

10.0

 

 

 

15.3

 

TOTAL LIABILITIES

 

1,426.4

 

 

 

1,421.2

 

CONTINGENCIES - NOTE 11

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Preferred stock, $0.0001 par value per share, 1,000,000 shares authorized, 1,200 shares issued and outstanding at both March 31, 2024 and December 31, 2023 (1,200,000 Depositary Shares representing a 1/1000th fractional interest in a share of 10% Series A Cumulative Perpetual Preferred Stock)

 

 

 

 

 

Common stock, $0.0001 par value per share, 200,000,000 shares authorized; 32,805,359 and 32,369,820 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

Additional paid-in capital

 

236.0

 

 

 

233.8

 

Treasury stock at cost, 862,182 shares of common stock held at both March 31, 2024 and December 31, 2023

 

(5.9

)

 

 

(5.9

)

Accumulated deficit

 

(91.0

)

 

 

(76.4

)

Accumulated other comprehensive loss

 

(2.2

)

 

 

(1.8

)

TOTAL STOCKHOLDERS’ EQUITY

 

136.9

 

 

 

149.7

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

1,563.3

 

 

$

1,570.9

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

 

ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in millions, except share and per share amounts)

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

New and used equipment sales

$

228.6

 

 

$

219.6

 

Parts sales

 

72.9

 

 

 

68.4

 

Service revenues

 

64.0

 

 

 

60.2

 

Rental revenues

 

48.5

 

 

 

43.5

 

Rental equipment sales

 

27.6

 

 

 

29.0

 

Total revenues

 

441.6

 

 

 

420.7

 

Cost of revenues:

 

 

 

 

 

New and used equipment sales

 

192.4

 

 

 

179.0

 

Parts sales

 

48.3

 

 

 

45.4

 

Service revenues

 

27.0

 

 

 

25.1

 

Rental revenues

 

6.7

 

 

 

6.1

 

Rental depreciation

 

27.1

 

 

 

22.9

 

Rental equipment sales

 

19.5

 

 

 

20.9

 

Total cost of revenues

 

321.0

 

 

 

299.4

 

Gross profit

 

120.6

 

 

 

121.3

 

General and administrative expenses

 

114.6

 

 

 

104.0

 

Non-rental depreciation and amortization

 

6.9

 

 

 

5.2

 

Total operating expenses

 

121.5

 

 

 

109.2

 

(Loss) income from operations

 

(0.9

)

 

 

12.1

 

Other (expense) income:

 

 

 

 

 

Interest expense, floor plan payable – new equipment

 

(2.8

)

 

 

(1.5

)

Interest expense – other

 

(13.3

)

 

 

(10.5

)

Other income

 

0.9

 

 

 

1.0

 

Total other expense, net

 

(15.2

)

 

 

(11.0

)

(Loss) income before taxes

 

(16.1

)

 

 

1.1

 

Income tax (benefit) provision

 

(4.2

)

 

 

0.1

 

Net (loss) income

 

(11.9

)

 

 

1.0

 

Preferred stock dividends

 

(0.8

)

 

 

(0.8

)

Net (loss) income available to common stockholders

$

(12.7

)

 

$

0.2

 

Basic (loss) income per share

$

(0.38

)

 

$

0.01

 

Diluted (loss) income per share

$

(0.38

)

 

$

0.01

 

Basic weighted average common shares outstanding

 

33,108,695

 

 

 

32,223,221

 

Diluted weighted average common shares outstanding

 

33,108,695

 

 

 

32,430,715

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

 

ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(in millions)

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Net (loss) income

$

(11.9

)

 

$

1.0

 

Other comprehensive (loss) income:

 

 

 

 

 

Foreign currency translation adjustments

 

(1.1

)

 

 

0.1

 

Change in fair value of derivative, net of tax

 

0.7

 

 

 

(0.4

)

Total other comprehensive loss (1)

 

(0.4

)

 

 

(0.3

)

Comprehensive (loss) income

$

(12.3

)

 

$

0.7

 

(1) There were no material reclassifications from Accumulated other comprehensive (loss) income reflected in Total other comprehensive loss for the three months ended March 31, 2024 and 2023. There were no material taxes associated with Total other comprehensive loss for the three months ended March 31, 2024 and 2023.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(in millions, except share and per share amounts)

 

Three Months Ended March 31, 2024

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number
of Shares

 

 

Amount

 

 

Number of
Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Accumulated
Deficit

 

 

Treasury Stock

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Total
Stockholders'
Equity (Deficit)

 

Balance at December 31, 2023

 

1,200,000

 

 

$

 

 

 

32,369,820

 

 

$

 

 

$

233.8

 

 

$

(76.4

)

 

$

(5.9

)

 

$

(1.8

)

 

$

149.7

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11.9

)

 

 

 

 

 

 

 

 

(11.9

)

Dividends on preferred stock, $0.625 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.8

)

 

 

 

 

 

 

 

 

(0.8

)

Dividends on common stock and dividend equivalent on stock-based compensation, $0.057 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.9

)

 

 

 

 

 

 

 

 

(1.9

)

Stock-based compensation including employee stock purchase plan

 

 

 

 

 

 

 

435,539

 

 

 

 

 

 

2.2

 

 

 

 

 

 

 

 

 

 

 

 

2.2

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.1

)

 

 

(1.1

)

Change in fair value of derivative, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.7

 

 

 

0.7

 

Balance at March 31, 2024

 

1,200,000

 

 

$

 

 

 

32,805,359

 

 

$

 

 

$

236.0

 

 

$

(91.0

)

 

$

(5.9

)

 

$

(2.2

)

 

$

136.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2023

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number
of Shares

 

 

Amount

 

 

Number of
Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Accumulated
Deficit

 

 

Treasury Stock

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Total
Stockholders'
Equity (Deficit)

 

Balance at December 31, 2022

 

1,200,000

 

 

$

 

 

 

32,194,243

 

 

$

 

 

$

222.8

 

 

$

(74.2

)

 

$

(5.9

)

 

$

(2.9

)

 

$

139.8

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.0

 

 

 

 

 

 

 

 

 

1.0

 

Dividends on preferred stock, $0.625 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.8

)

 

 

 

 

 

 

 

 

(0.8

)

Dividends on common stock and dividend equivalent on stock-based compensation, $0.057 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.9

)

 

 

 

 

 

 

 

 

(1.9

)

Impact of adoption of new accounting standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.5

)

 

 

 

 

 

 

 

 

(0.5

)

Stock-based compensation

 

 

 

 

 

 

 

173,869

 

 

 

 

 

 

0.8

 

 

 

 

 

 

 

 

 

 

 

 

0.8

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Change in fair value of derivative, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.4

)

 

 

(0.4

)

Balance at March 31, 2023

 

1,200,000

 

 

$

 

 

 

32,368,112

 

 

$

 

 

$

223.6

 

 

$

(76.4

)

 

$

(5.9

)

 

$

(3.2

)

 

$

138.1

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


 

ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

OPERATING ACTIVITIES

 

 

 

 

 

Net (loss) income

$

(11.9

)

 

$

1.0

 

Adjustments to reconcile net (loss) income to net cash flows used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

34.0

 

 

 

28.1

 

Amortization of debt discount and debt issuance costs

 

0.4

 

 

 

0.3

 

Imputed interest

 

 

 

 

0.3

 

Gain on sale of rental equipment

 

(8.1

)

 

 

(8.1

)

Provision for inventory obsolescence

 

0.5

 

 

 

0.1

 

Provision for losses on accounts receivable

 

1.7

 

 

 

1.5

 

Change in fair value of derivative instruments

 

(0.1

)

 

 

 

Stock-based compensation expense

 

1.3

 

 

 

0.8

 

Changes in deferred income taxes

 

 

 

 

(0.1

)

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

Accounts receivable

 

8.0

 

 

 

1.3

 

Inventories

 

(66.3

)

 

 

(114.3

)

Proceeds from sale of rental equipment

 

27.6

 

 

 

29.0

 

Prepaid expenses and other assets

 

5.0

 

 

 

(5.2

)

Manufacturers floor plans payable

 

0.4

 

 

 

57.0

 

Accounts payable, accrued expenses, customer deposits, and other current liabilities

 

(0.2

)

 

 

(6.5

)

Leases, deferred revenue, net of current portion and other liabilities

 

(4.2

)

 

 

(5.3

)

Net cash used in operating activities

 

(11.9

)

 

 

(20.1

)

INVESTING ACTIVITIES

 

 

 

 

 

Expenditures for rental equipment

 

(12.9

)

 

 

(14.6

)

Expenditures for property and equipment

 

(4.4

)

 

 

(3.1

)

Proceeds from sale of property and equipment

 

0.1

 

 

 

 

Expenditures for acquisitions, net of cash acquired

 

 

 

 

(1.7

)

Other investing activities

 

(0.9

)

 

 

0.5

 

Net cash used in investing activities

 

(18.1

)

 

 

(18.9

)

FINANCING ACTIVITIES

 

 

 

 

 

Proceeds from line of credit and long-term borrowings

 

72.8

 

 

 

97.0

 

Principal payments on line of credit, long-term debt, and finance lease obligations

 

(61.9

)

 

 

(59.8

)

Proceeds from non-manufacturer floor plan payable

 

41.0

 

 

 

50.7

 

Payments on non-manufacturer floor plan payable

 

(39.1

)

 

 

(49.7

)

Preferred stock dividends paid

 

(0.8

)

 

 

(0.8

)

Common stock dividends declared and paid

 

(1.9

)

 

 

(1.9

)

Other financing activities

 

(5.5

)

 

 

2.4

 

Net cash provided by financing activities

 

4.6

 

 

 

37.9

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

 

 

0.1

 

NET CHANGE IN CASH

 

(25.4

)

 

 

(1.0

)

 

 

 

 

 

Cash, Beginning of year

 

31.0

 

 

 

2.7

 

Cash, End of period

$

5.6

 

 

$

1.7

 

Supplemental schedule of noncash investing and financing activities:

 

 

 

 

 

Noncash asset purchases:

 

 

 

 

 

Net transfer of assets from inventory to rental fleet within property and equipment

$

38.8

 

 

$

42.7

 

Supplemental disclosures of cash flow information

 

 

 

 

 

Cash paid for interest

$

10.6

 

 

$

6.8

 

Cash paid for income taxes

$

0.2

 

 

$

0.1

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8


 

ALTA EQUIPMENT GROUP INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in millions, except per share data, unless otherwise indicated)

NOTE 1 — ORGANIZATION AND NATURE OF OPERATIONS

Nature of Operations

Alta Equipment Group Inc. and its subsidiaries (“Alta” or the “Company”) is engaged in the sale, service, and rental of material handling, construction, and environmental processing equipment in the states of Michigan, Illinois, Indiana, Ohio, Pennsylvania, New York, Virginia, Massachusetts, Maine, New Hampshire, Vermont, Rhode Island, Connecticut, Nevada, and Florida as well as the Canadian provinces of Quebec and Ontario. Unless the context otherwise requires, the use of the terms “the Company”, “we”, “us,” and “our” in these notes to the unaudited condensed consolidated financial statements refers to Alta Equipment Group Inc. and its consolidated subsidiaries.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the consolidated accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, all adjustments, consisting of all normal and recurring adjustments, considered necessary for a fair presentation of our condensed consolidated cash flows, statements of operations, and balance sheets for the periods presented have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the 2023 Form 10-K. All intercompany transactions and balances have been eliminated in the preparation of the condensed consolidated financial statements.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We describe our significant accounting policies in Note 2 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023. During the three months ended March 31, 2024, there were no significant changes to those accounting policies.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are based on assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued guidance to improve the disclosures about a public entity’s reportable segments requiring additional, more detailed information about a reportable segment’s expenses. The Company is required to adopt the guidance in the 2024 Annual Report on Form 10-K, though early adoption is permitted. The Company is currently evaluating the impact of this guidance on our consolidated financial statements.

In December 2023, the FASB issued guidance to provide disaggregated income tax disclosures on the rate reconciliation and income taxes paid. The Company is required to adopt the guidance in the first quarter of 2025, though early adoption is permitted. The Company is currently evaluating the impact of this guidance on our consolidated financial statements.

The Company believes all other recently issued accounting pronouncements from the FASB that the Company has not noted above will not have a material impact on our consolidated financial statements or do not apply to us.

NOTE 3 — REVENUE RECOGNITION

We recognize revenue in accordance with two different accounting standards: 1) Topic 606, Revenues from Contracts with Customers ("Topic 606") and 2) Topic 842, Leases, ("Topic 842").

9


 

Disaggregation of Revenues

The following table summarizes the Company’s disaggregated revenues as presented in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 by revenue type and the applicable accounting standard.

 

Three Months Ended March 31, 2024

 

 

Three Months Ended March 31, 2023

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New and used equipment sales

$

 

 

$

228.6

 

 

$

228.6

 

 

$

 

 

$

219.6

 

 

$

219.6

 

Parts sales

 

 

 

 

72.9

 

 

 

72.9

 

 

 

 

 

 

68.4

 

 

 

68.4

 

Service revenues

 

 

 

 

64.0

 

 

 

64.0

 

 

 

 

 

 

60.2

 

 

 

60.2

 

Rental revenues

 

48.5

 

 

 

 

 

 

48.5

 

 

 

43.5

 

 

 

 

 

 

43.5

 

Rental equipment sales

 

 

 

 

27.6

 

 

 

27.6

 

 

 

 

 

 

29.0

 

 

 

29.0

 

Total revenues

$

48.5

 

 

$

393.1

 

 

$

441.6

 

 

$

43.5

 

 

$

377.2

 

 

$

420.7

 

The Company believes that the disaggregation of revenues from contracts to customers as summarized above, together with the discussion below, depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. See Note 16, Segments, for further information.

Leases revenues (Topic 842)

Rental revenues: Owned equipment rentals represent revenues from renting equipment. The Company accounts for these rental contracts as operating leases. The Company recognizes revenue from equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract includes rates for daily, weekly, or monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can extend across multiple reporting periods, the Company records unbilled rental revenues and deferred rental revenues at the end of each reporting period. Unbilled rental revenues are included as a component of "Accounts receivable, net" on the Condensed Consolidated Balance Sheets. Rental equipment may also be purchased outright (“rental equipment sales”) by our customers. Rental revenue and revenue attributable to rental equipment sales are recognized in "Rental revenues" and "Rental equipment sales" on the Condensed Consolidated Statements of Operations, respectively.

Revenues from contracts with customers (Topic 606)

Accounting for the different types of revenues pursuant to Topic 606 is discussed below. The Company’s revenues under Topic 606 are primarily recognized at a point in time rather than over time.

New and used equipment sales: With the exception of bill-and-hold arrangements and project-based revenues, the Company’s revenues from the sale of new and used equipment are recognized at the time of delivery to, or pick-up by, the customer, which is when the customer obtains control of the promised good(s). Under bill-and-hold arrangements, revenue is recognized when all configuration work is complete and the equipment has been set aside for final shipment, at which point the Company has determined control has been transferred. The bill-and-hold arrangements primarily apply to sales when physical shipment of heavy equipment to the customer is prohibited by law (e.g., frost laws) or requested by the customer due to their inability to arrange freight simultaneous to the satisfaction of the performance obligations. The customer equipment sold under a bill-and-hold arrangement is physically separated from Company inventory and that equipment cannot be used by the Company or sold to another customer. Revenues recognized from bill-and-hold agreements totaled $2.9 million and $6.8 million for the three months ended March 31, 2024 and 2023, respectively. The Company does not offer material rights of return.

Project-based revenues, as referred to herein, are contracts with customers where the Company provides design and build solutions, automated equipment installation and system integration and set-up of warehouse management systems and related hardware and software support services. This revenue is recognized as the performance obligations are satisfied over time using the cost-to-cost input method, based on contract costs incurred to date to total estimated contract costs. The Company recognizes deferred revenue with respect to project-based services. The Company recognized $17.0 million and $23.1 million in project-based revenues for the three months ended March 31, 2024 and 2023 respectively.

Parts sales: Revenues from the sale of parts are recognized at the time of pick-up by the customer for over-the-counter sales transactions and for parts associated with periodic maintenance services at the time such services are completed. For parts that are shipped to a customer, the Company has elected to use a practical expedient of Topic 606 and treat such shipping activities as fulfillment costs, thereby recognizing revenues at the time of shipment, which is when the customer obtains control.

Service revenues: The Company records service revenues primarily from guaranteed maintenance contracts and periodic services with customers. The Company recognizes periodic maintenance service revenues at the time such services are completed. The Company recognizes guaranteed maintenance contract revenues over time based on an estimated rate at which the services are provided over the life of the contract, typically three to five years. Revenue recognized from guaranteed maintenance contracts totaled $5.5 million and $6.3 million for the three months ended March 31, 2024 and 2023, respectively. The Company also records service revenues from warranty contracts whereby the Company performs service on behalf of an Original Equipment Manufacturer (“OEM”) or third-party warranty provider.

10


 

Rental equipment sales: The Company also sells rental equipment from our rental fleet. These sales are recognized at the time of delivery to, or pick-up by, the customer, which is when the customer obtains control of the promised good(s). In some cases, certain rental agreements contain a rental purchase option, whereby the customer has an option to purchase the rented equipment during the term of the rental agreement. Revenues from the sale of rental equipment are recognized at the time the rental purchase option agreement has been approved and signed by both parties, as the equipment is already in the customer’s possession under the previous rental agreement, and therefore control has been transferred as title has been transferred.

Contract Costs

The Company does not recognize assets associated with the incremental costs of obtaining a contract with a customer that the Company expects to recover (for example, a sales commission). Most of the Company’s revenues are recognized at a point in time or over a period of one year or less, and the Company has used the practical expedient that allows us to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less. The amount of the costs associated with the revenues recognized over a period of greater than one year is insignificant.

Receivables and Contract Assets and Liabilities

With respect to our receivables, we believe the concentration of credit risk is limited because our customer base is comprised of a large number of geographically diverse customers.

The Company has contract assets and contract liabilities associated with project-based contracts with customers.

Contract assets are fulfilled contractual obligations prior to receivables being recognizable for project-based revenue. Contract assets as of March 31, 2024 and December 31, 2023 were $4.0 million and $4.5 million, respectively.

Deferred revenue (contract liabilities) includes the unearned portion of project-based revenue, revenue related to guaranteed maintenance service contracts for customers covering equipment previously purchased and deferred revenue related to rental agreements. Total deferred revenue relating to project-based revenue, service maintenance contracts, and equipment rental agreements as of March 31, 2024 and December 31, 2023 was $18.3 million and $20.4 million, respectively. For the three months ended March 31, 2024 and 2023, the Company recognized revenue of $8.1 million and $7.5 million, respectively, from the prior year ending deferred revenue balance.

Our Chief Executive Officer ("CEO"), Chief Financial Officer and Chief Operating Officer collectively own an indirect, non-controlling minority interest in OneH2, Inc. (“OneH2”), which they each acquired through various transactions that took place in early 2018 and prior. Our CEO is on the Board of Directors of OneH2. OneH2 is a privately held company that produces and delivers hydrogen fuel to end users and manufactures modular hydrogen plants and related equipment. During the three months ended March 31, 2024 and 2023, the Company purchased $0.6 million and $0.2 million of hydrogen fuel from OneH2, respectively. During the three months ended March 31, 2023, the Company paid OneH2 $1.1 million as part of the Company's investment to build and commercialize a hydrogen production plant for the Company which we expect to become operational in 2024. The Company did not make any additional payments in connection with our hydrogen production plant investment during the three months ended March 31, 2024.

NOTE 5 — INVENTORIES

Inventories, net, consisted of the following:

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

New equipment

$

398.4

 

 

$

373.6

 

Used equipment

 

52.2

 

 

 

54.6

 

Work in process

 

9.7

 

 

 

8.2

 

Parts

 

101.6

 

 

 

101.9

 

Gross inventory

 

561.9

 

 

 

538.3

 

Inventory reserves

 

(8.2

)

 

 

(7.6

)

Inventories, net

$

553.7

 

 

$

530.7

 

 

11


 

Direct labor of $1.3 million and $1.2 million incurred for open service orders were capitalized and included in work in process as of March 31, 2024 and December 31, 2023, respectively. The remaining work in process balances as of March 31, 2024 and December 31, 2023 primarily represent parts applied to open service orders. Rental depreciation expense, for new and used equipment inventory under short-term leases with purchase options, was $3.1 million and $2.5 million for the three months ended March 31, 2024 and 2023, respectively.

NOTE 6 — PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following:

 

March 31,

 

 

December 31,

 

 

2024

 

 

2023

 

Land

$

3.2

 

 

$

2.1

 

Rental fleet

 

609.3

 

 

 

600.8

 

Buildings, equipment, and leasehold improvements:

 

 

 

 

 

Machinery and equipment

 

9.1

 

 

 

8.5

 

Autos and trucks

 

7.6

 

 

 

7.7

 

Buildings and leasehold improvements

 

21.8

 

 

 

20.8

 

Construction in progress

 

5.8

 

 

 

6.1

 

Finance lease right-of-use assets

 

52.9

 

 

 

48.4

 

Office equipment

 

5.3

 

 

 

4.9

 

Computer equipment

 

14.3

 

 

 

13.3

 

Total cost

 

729.3

 

 

 

712.6

 

 

 

 

 

 

Less: accumulated depreciation and amortization:

 

 

 

 

 

Rental fleet

 

(210.2

)

 

 

(209.4

)

Buildings, equipment, autos and trucks, leasehold improvements, finance leases and office and computer equipment

 

(42.1

)

 

 

(38.4

)

Total accumulated depreciation and amortization

 

(252.3

)

 

 

(247.8

)

Property and equipment, net

$

477.0

 

 

$

464.8

 

 

Total depreciation and amortization on property and equipment was $28.3 million and $23.4 million for the three months ended March 31, 2024 and 2023, respectively. The Company had assets related to finance leases with gross carrying values totaling $52.9 million and $48.4 million, and accumulated amortization balances totaling $12.7 million and $10.8 million, as of March 31, 2024 and December 31, 2023, respectively.

NOTE 7 — GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill in total and by reportable segment for the three months ended March 31, 2024:

 

Material
Handling

 

 

Construction
Equipment

 

 

Master Distribution

 

 

Total

 

Balance, December 31, 2023

$

15.0

 

 

$

43.4

 

 

$

18.3

 

 

$

76.7

 

Adjustments to purchase price allocations

 

 

 

 

(0.7

)

 

 

 

 

 

(0.7

)

Balance, March 31, 2024

$

15.0

 

 

$

42.7

 

 

$

18.3

 

 

$

76.0

 

Goodwill is tested for impairment by reporting unit annually or more frequently if events or circumstances indicate that an impairment may exist. There were no indicators of potential impairment during the three months ended March 31, 2024. See Note 15, Business Combinations, for further information.

12


 

The gross carrying amount of intangible assets and accumulated amortization as of March 31, 2024 and December 31, 2023 were as follows:

 

March 31, 2024

 

 

Weighted Average Remaining Life (in years)

 

 

Gross carrying
amount

 

 

Accumulated
amortization

 

 

Net carrying
amount

 

Customer and supplier relationships

 

7.4

 

 

$

73.9

 

 

$

(18.7

)

 

$

55.2

 

Other intangibles

 

3.7

 

 

 

14.5

 

 

 

(5.8

)

 

 

8.7

 

Total

 

6.8