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What changed in ALTA EQUIPMENT GROUP INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ALTA EQUIPMENT GROUP INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+659 added−312 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-09)

Top changes in ALTA EQUIPMENT GROUP INC.'s 2023 10-K

659 paragraphs added · 312 removed · 264 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

63 edited+11 added−4 removed18 unchanged
Biggest changeAs with new and used equipment sales, the rent-to-sell solution generates parts and service revenue as equipment is sold into our territories. 2 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.
Biggest changeIndustry Background The industries for material handling, construction, and environmental processing equipment are driven by a broad range of economic factors and trends in certain end markets, including, but not limited to, manufacturing, distribution and logistics activity, e-commerce, food and beverage, medical, general construction, aggregate and mining, infrastructure, biofuel, composting, recycling and waste management.
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).
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 to distribute OEM equipment in a significant geographic territory (e.g., North America).
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.
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 our ERP and its CRM functionality enhances our territory management capabilities by increasing the productivity of our sales teams and tracking equipment service history to advance our customer support goals.
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 one of a very limited number of public equipment dealerships, and we believe 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.
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.
In addition to repair and maintenance on an as needed or scheduled basis, we provide recurring maintenance services and warranty repairs for our customers. 2 Equipment rentals. We rent material handling and construction equipment to our customers.
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.
Competitive Strengths We believe the following attributes are important to our ability to compete effectively and achieve our financial objectives: Integrated Dealership Platform Providing Full Scale Solutions to Customers.
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.
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.altg.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.
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.
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 revenues.
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.
As a result, we expect future benefits from increasing aftermarket parts and service revenues 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 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.
We currently do not anticipate an 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.
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.
We actively populate our territories with new and used equipment, which generates predictable, high-margin parts and service revenues. 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.
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 and our regional subsidiaries enjoy long-standing relationships with leading material handling and construction equipment OEMs, including Hyster-Yale, Volvo, JCB, CNH, McCloskey 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 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.
We sell new material handling, construction, crushing and screening, 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.
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.
Importantly, these agreements give us exclusive rights to purchase OEM parts and 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 Revenues.
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 .
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 parts and service revenues. • Territorial Expansion .
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.
Information Technology ("IT") Systems Among other metrics, our IT systems track new, used and 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.
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 engage in five principal business activities in these equipment categories: (i) new and used equipment sales; (ii) parts sales; (iii) repair and maintenance services; (iv) equipment rentals and (v) rent-to-sell equipment. Within our territories, we are primarily the exclusive distributor of new equipment and replacement parts on behalf of our Original Equipment Manufacturer (“OEM”) partners.
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 .
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 16 acquisitions since 2020. We have two primary areas of focus when pursuing acquisitions: • Territory In-Fill .
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.
Advertising and marketing costs are expensed as incurred and for the years ended December 31, 2023, 2022 and 2021 were $10.2 million $5.4 million, and $5.5 million respectively. Suppliers We purchase a significant amount of equipment and parts from a large number of manufacturers with whom we have distribution agreements.
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.
Our integrated equipment sales, service, and rental platform provides a one-stop-shop for a highly diverse group of customers, enabling us to profitably grow our revenues over time and providing 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 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.
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.
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.
As an example, to leverage our prowess in e-mobility and meet the growing demand for commercial electric vehicles within our existing territories, we entered the over-the-road vehicle dealership industry by virtue of our partnership with Nikola and various charging and infrastructure related OEMs.
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.
We purchased approximately 47% of our new equipment, rental fleet, and replacement parts from five major OEMs (Hyster-Yale, Kubota, JCB, Doppstadt and Volvo) during the year ended December 31, 2023. Notably, we are the exclusive OEM replacement part distributor in substantially all our territories, allowing us to provide superior aftermarket service support to our customers.
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 our experience, reliability and uptime are the key considerations for customers in selecting an equipment dealer, and we believe our focus on parts and service support has helped us win and maintain customer business.
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 4 interest period.
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 before the expiration of the promotional interest period.
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.
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 have been and continue to be one of the few consolidators in our industry.
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.
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 sourced from equipment trade-ins and the purchase of lease return assets. Used equipment sales, like new equipment sales, generate parts and services business for us. Parts sales.
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.
Human Capital Employees As of December 31, 2023, we had approximately 3,000 employees. Of these employees, approximately 1,300 are skilled technicians paid on an hourly basis and the remainder are hourly and salaried corporate, sales, operating, and administrative personnel. We have approximately 630 employees covered by collective bargaining agreements.
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.
Competition among equipment dealers 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.
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.
Sales and Marketing We have organized our sales forces to be aligned around specific equipment types, which allows our sales teams to develop expertise in certain end markets which allows them to effectively meet the demands of our diverse customer base. We have commission-based compensation programs for our sales forces.
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.
Through our branch network, we sell, rent, and provide parts and service support for several categories of specialized equipment, including lift trucks and other material handling equipment, heavy and compact earthmoving equipment, crushing and screening equipment, environmental processing equipment, cranes and aerial work platforms, paving and asphalt equipment, other construction equipment and allied products.
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.
While our specialized, well-trained sales forces strengthen our customer relationships and foster customer loyalty, we also promote our business through marketing and advertising, including industry publications and trade shows, digital marketing, direct mail campaigns, television and radio, and our website at www.altg.com.
These opportunities include continuing education and specialty training. 6 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.
Compensation and Benefits We are committed to providing competitive compensation and benefits programs for our employees as we believe they 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.
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.
We are a recognized consolidator in the material handling and construction equipment industries, and many incumbent dealership owners have approached our management about potential sale transactions as a result. We believe these dynamics will contribute to a consistent acquisition pipeline at attractive valuation levels, over the long run.
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.
With our over 80 dealership locations, we believe 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. Leading Dealer for Equipment Manufacturers.
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.
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. 6 Generally, the total number of employees does not significantly fluctuate throughout the year. However, acquisition activity may increase the number of our employees.
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.
Our top ten customers combined accounted for approximately 7% of our total revenues in 2023. 4 Floor Plan Financing New equipment inventory is primarily financed with OEM floor plan facilities with an initial promotional period that is either subsidized or interest-free.
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.
Within our territories, our competitors range from multi-location, regional operators to single-location dealers of competing equipment brands. We compete with equipment dealers that sell other brands of equipment 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.
The OEMs pay us for repairs we perform on equipment under warranty in our territories. 5 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.
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 severe winter weather conditions typically have a negative impact on our business in our northern territories.
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 view floor plan financing on new equipment inventory that is less than a year old as a component of our working capital, and do not consider floor plan financing on new equipment as part of our corporate indebtedness.
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.
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 our locations.
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.
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, Nevada, and the Canadian provinces of Ontario and Quebec. In selecting additional territories for acquisition, we prioritize markets with a high density of equipment users. Pursue Synergistic Verticals .
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.
Experienced Management Team. Our senior management team is led by Chief Executive Officer (“CEO”) Ryan Greenawalt, Chief Financial Officer (“CFO”) Anthony Colucci, Chief Operating Officer (“COO”) Craig Brubaker and Chief Legal Officer and 3 General Counsel, Jeffrey Hoover, each of whom has substantial experience in the equipment distribution industry.
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.
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.
Item 1. Bu siness. 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.
Item 1. Bu siness. Overview We own and operate one of the largest integrated equipment dealership platforms in North America.
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.
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 equipment distribution and service industry is competitive and fragmented, with large numbers of competitors operating on a regional or local scale.
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.
Environmental, Health and Safety Regulations Environmental 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 and Canada.
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.
Ability to Attract and Retain Skilled Technical Employees. We believe 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 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).
Business Strategy We employ the following business strategies: Align with World-Class OEMs by Securing Dealership Agreements for Exclusive Territories. We contractually agree with best-in-class material handling, construction, and environmental processing equipment OEMs to represent them exclusively in designated territories (i.e., a state or province).
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.
Total contributions made by the Company to the 401(k) plan amounted to $5.4 million, $4.0 million and $3.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.
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.
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 approach to the market generates parts and service revenues as equipment is sold into our territories.
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. 3 Business Strategy We employ the following business strategies: Align with World-Class Original Equipment Manufacturers by Securing Dealership Agreements for Exclusive Territories.
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.
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.
Rental operations are fully aligned with our dealership strategy, as the rent-to-sell solution provides an additional sales channel through which we are able to populate our territories with equipment and generate high-margin parts and service revenues 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.
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.
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.
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.
While we believe a dealers service capabilities are a primary factor in a customer's purchasing decision, price can be a key point of differentiation in selecting among competing equipment, as our OEM partners often provide pricing flexibility and discounting in order to drive market share in their relative segments of the market.
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.
Our critical business systems are deployed across a hybrid infrastructure, leveraging both on-premise and cloud environments to ensure resilience, scalability and optimal performance. 5 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.
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.
Our 2022 acquisition of Ecoverse Industries, LTD ("Ecoverse") represented our entrance into the wholesale equipment master distribution sector. Customers Our customer end markets include diversified manufacturing, food and beverage, automotive, municipal/government, education, pharmaceutical and medical, wholesale and retail distribution, construction, agriculture, road building, mining, recycling and waste management among others.
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.
We are a leading U.S. dealer for many globally 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.
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.
Fluctuations in the level of our business activity could require some staffing level adjustments in response to actual or anticipated customer demand. Talent Development and Employee Training Our goal is to attract, develop, and retain a talented and high-performing workforce.
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 also have integrations for account reconciliations, consolidations, transaction matching, and task management that support critical accounting processes such as the financial close, account reconciliations, intercompany accounting, compliance and reporting. 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.
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.
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. Superior Parts and Services Operations Supporting Customer Relationships. We provide parts and service to our customers 24 hours a day, 365 days a year.
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.
Total contributions made by the Company to the ESPP amounted to $0.2 million for the year ended December 31, 2023. Legal Proceedings There is no material litigation, arbitration, or governmental proceeding currently pending against us where the potential liability is not offset by expected insurance proceeds, or any members of our management team in their capacity as such.
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.
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. Our in-house recruiters and partnerships with colleges and trade schools help build relationships and recruit talent from various sources within our territories.
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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.
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More recently, given the Company’s successful history with electrified fork lifts, battery charging and power generation as well as its material handling customer base, where customers typically employ large fleets of commercial over-the-road vehicles in their day-to-day operations, we are pursuing a strategy focused on the distribution and powering of commercial electric vehicles in the over-the-road vehicle segment.
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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.
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While our electromobility (“e-mobility”) business, and the industry in general, is in its early stages of development, we believe that our first-mover advantage and expertise in this emerging market represents an exciting future growth opportunity. We are committed to providing our customers with a best-in-class equipment dealership experience.
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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 .
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Above all, we view our technicians as key contributors to future success, and we accord respect to our skilled technicians. 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.
Removed
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.
Added
Our customers vary from small, single machine owners to large construction contractors and leading multi-national commercial companies. In 2023, no single customer accounted for more than 1% of our total revenues.
Added
The OEMs pay us for repairs we perform on equipment under warranty in our territories.
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That said, some of the negative impact of severe winters can be mitigated given our exposure to the snow removal market and additional service work related to extreme cold temperatures impact on our customers equipment.
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Within substantially all 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.
Added
As part of our evaluation of our management employees, we evaluate the safety records of the employees for whom they have management responsibility. We also, in the normal course of business in connection with our OEM partners and other third parties, provide our skilled technician base with regular health and safety training based on the latest industry protocols.
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We believe our relations with our employees are good, and we have never experienced a long-term work stoppage.
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In April 2022, the Company's Board of Directors adopted the 2022 Employee Stock Purchase Plan (the "ESPP"), which became effective upon approval by the Company's shareholders at the Annual Meeting of Stockholders on June 9, 2022. On June 8, 2023 the Company filed Form S-8 to register 325,000 common stock shares, the total shares reserved for the ESPP.
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Available Information We electronically file annual reports, quarterly reports, proxy statements and other reports and information statements with the SEC.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

97 edited+8 added−11 removed43 unchanged
Biggest changeThe 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; 7 • 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.
Biggest changeThe Company’s business may also be negatively impacted, either temporarily or long-term, by: • a reduction in spending levels by our customers; • the lack of availability of credit for our customers; • adverse changes in federal, state, and local government infrastructure spending and taxation; 7 • excess fleet in the equipment markets we participate in; • our inability to pass along operating cost increases related to inflation to customers; • an increase in costs generally, including the cost of inputs for our customers' operations, as a result of inflation or other factors; • 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 generally, including those associated with commercial electric vehicle business model; • disruptions to global supply chains, specifically our major OEM partner supply chains; or • other unforeseen or catastrophic events.
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.
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, 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, natural disasters or other catastrophic events.
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.
There can be no assurance 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 the Company’s internal controls are effective.
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.
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 our indebtedness and other liabilities have been paid.
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.
In addition, the Series A Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities (as well as any preferred equity interests held by others) of our existing subsidiaries and any future subsidiaries.
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 ability to pay dividends may be impaired by a number of factors, including the other risks identified herein. Also, our payment of dividends depends upon our financial condition and other factors as our Board of Directors may deem relevant from time to time.
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 cash dividends on the Series A Preferred Stock requires us to have either net profits or positive net assets (total assets less total liabilities), 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.
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.
The Company is a party to lawsuits in the normal course of 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.
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 9 operating results by limiting the Company’s capacity to effectively monitor and control the Company’s operations and adjust to changing market conditions.
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.
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.
Additionally, unfavorable financial market conditions may depress demand for the Company’s products and services and/or make it difficult for the Company’s customers to obtain financing and credit on reasonable terms. Unfavorable financial 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.
The success of this element of the Company’s growth strategy depends, in part, on selecting strategic acquisition candidates at attractive prices and 11 effectively integrating their businesses into the Company’s own, including with respect to financial reporting and regulatory matters.
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.
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.
In the future, international, 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.
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.
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 9 cost increases through to the Company’s customers.
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.
Voting rights for holders of depositary shares 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 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 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 15 to the Series A Preferred Stock, provided that in any event adequate provision for redemption has not been made.
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.
Among other things, these integration risks could include: • the loss of key employees; • disruption of operations and business; • retention or transition of existing customers and vendors; • integration of corporate cultures and maintenance of employee morale; • inability to maintain and increase competitive presence; • customers and revenue losses; • 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.
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.
The Company could be adversely affected by environmental and safety requirements which could force us to use significant capital resources, increase operational costs and/or may subject us 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.
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.
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 pay dividends on the Series A Preferred Stock. Our depositary shares representing interests in the Series A Preferred Stock have extremely limited voting rights.
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.
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 market value risk upon disposition.
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.
If the Company is required to pay significantly higher premiums for insurance, is not able to maintain insurance coverage at affordable rates or if we 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.
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.
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 revenues 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. 8 The Company purchases a significant amount of its equipment from a limited number of manufacturers.
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 our equipment from a limited number of manufacturers.
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.
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 us to various liability claims, which may exceed the level of the Company’s insurance coverage resulting in the Company not being fully protected.
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.
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 our business and execute our strategy.
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.
Events beyond the Company’s control may also affect our 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.
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.
If the Company’s cash flows and capital resources are insufficient to fund our 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 our indebtedness.
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.
Changes in these requirements, or any material failure by the Company to comply with them, could increase the Company’s costs, affect our reputation, limit our business, consume management’s time and attention or otherwise generally impact our operations and financial results in adverse ways.
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.
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 an adverse effect on the Company’s business due to a reduction of, or inability to increase, the Company’s revenues.
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.
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.
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 Company may not be able to facilitate our 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 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.
The Company cannot make any assurances we 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, 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.
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 us to comply with more onerous covenants and further restrict the Company’s business operations.
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.
If the Company fails to maintain the adequacy of our 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.
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.
It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have an adverse effect on the Company’s business, financial condition and results of operations. 16 Environmental laws also impose obligations and liability for the cleanup of properties affected by hazardous substance spills or releases.
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’s ability to make scheduled debt payments depends on our 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 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 may not be able to remedy these defaults. If the Company’s indebtedness is accelerated, we 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.
To the extent we are unable to execute on our plan to produce and sell hydrogen 12 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.
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.
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.
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 our debt service and other obligations.
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.
The Company may encounter increased competition from existing competitors or new market entrants in the future which could have an 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.
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.
The Company cannot assure you we 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.
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 expects to use cash flow from operations and borrowings under our credit facilities to meet our current and future financial obligations, including funding our operations, service debt, and capital expenditures.
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.
Periods of decline could result in an overall decline in profitability and make it more difficult for the Company to make payments on our indebtedness and grow the Company’s business.
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.
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 Risks and Risks Related to our Indebtedness and Liquidity The Company’s substantial indebtedness could adversely affect the Company’s financial condition.
These events could negatively impact the Company’s business, financial position, results of operations, and cash flows. 14 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.
All of these events could negatively impact the Company’s business, financial condition, 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 our indebtedness and other liabilities and are effectively junior to all indebtedness and other liabilities of our subsidiaries.
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.
A significant or protracted disruption of fuel supplies could have an adverse effect on the Company’s financial condition and results of operations. 10 The Company is dependent on key personnel. A loss of key personnel could have an adverse effect on the Company’s business which could result in a decline in the Company’s revenues and profitability.
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.
The Company’s inability to refinance the Company’s indebtedness or to do so upon attractive terms 14 could materially and adversely affect the Company’s business prospects, results of operations, financial condition and cash flows, and make us vulnerable to adverse industry and general economic conditions.
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.
Lastly, 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 adverse effects on the Company’s labor costs, productivity and business flexibility. Increases in healthcare, pension and other costs under the Company’s benefit plans could adversely affect our financial condition and results of operations.
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. 16 Item 1B. Unresolve d Staff Comments. None.
It is possible that changes in environmental and worker health and safety laws or liabilities from newly discovered non-compliance or contamination could have an adverse effect on our business, financial condition and results of operations. Item 1B. Unresolve d Staff Comments. None.
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.
Any significant diversion of management’s attention or any major difficulties encountered in the integration of the businesses the Company acquires could have an 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.
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.
The Company cannot make assurances we will maintain a level of cash flows from operating activities sufficient to permit us to pay scheduled payments of principal and interest on the Company’s indebtedness.
If we are unable to remediate the material weakness or otherwise unable to maintain 10 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 we are 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 .
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.
The cash the Company generates from our business, together with cash we 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.
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 has operations throughout the U.S. and Canada and purchases capital goods from Europe which exposes us to multiple international, 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.
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.
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 or their competitiveness in the market overall.
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.
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 we fail to comply with any of these requirements.
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.
Any significant decline in the selling prices for used equipment could have an adverse effect on the Company’s business, financial condition and results of operations. The Company incurs maintenance and repair costs associated with our rental fleet equipment that could have an adverse effect on our business in the event these costs are greater than anticipated.
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.
Any significant diversion of management’s attention or any major difficulties encountered in the locations the Company opens in the future could have an 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.
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.
The Company’s revenues 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 our business. The Company’s revenues and operating results may vary from quarter to quarter and by season.
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.
The cost of new equipment from manufacturers that the Company sells or purchases for use in our 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 this equipment, or due to increased regulatory requirements, such as those related to taxes, tariffs or emissions.
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.
Various unions periodically seek to organize certain departments and/or locations of the Company’s non-union employees. Union organizing efforts or collective bargaining negotiations could potentially lead to work stoppages, strikes and/or slowdowns by certain employees of the Company, which could adversely affect the Company’s ability to serve our customers.
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.
Any additional indebtedness the Company incurs will make us 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 we are unable to obtain sufficient additional financing in the future, the Company’s business could be adversely affected.
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.
The Company may not be able to consummate those dispositions, and any proceeds we do receive from a disposition may not be adequate to meet any debt service obligations then due.
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.
The Company carries comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and future claims made during the respective policy periods.
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 Company’s business could be adversely affected if we are 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 our indebtedness on favorable terms, or at all, could adversely affect the Company’s liquidity and our ongoing results of operations.
Labor disputes could disrupt the Company’s ability to serve its customers and/or lead to higher labor costs. The Company has approximately 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.
Labor disputes could disrupt the Company’s ability to serve our customers and/or lead to higher labor costs. The Company has approximately 630 employees who are covered by a collective bargaining agreement and approximately 2,370 employees who are not represented by unions or covered by collective bargaining agreements.
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.
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 dealerships and rental companies to small, independent businesses with a limited number of locations.
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.
Although the Company believes we have alternative sources of supply for equipment sales and aftermarket parts we purchase in each of our core product categories, termination of one or more of the Company’s relationships with any of these major suppliers could have an adverse effect on the Company’s business, financial condition and results of operations if we were unable to obtain an adequate replacement supplier.
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.
Accordingly, the Company has an 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, New England, Florida, Michigan and Illinois markets. This strategic opportunity requires us to devote certain resources to it, including the time and attention of management.
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.
Termination of one or more of the Company’s relationships with any of those manufacturers could have an adverse effect on the Company’s business. The Company purchases most of our sales and rental equipment, and aftermarket parts from leading, internationally known OEMs.
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.
Failure to execute on this plan 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 an 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.
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.
Security breaches and other disruptions in the Company’s IT systems, including the Company’s ERP system, could limit the Company’s capacity to effectively monitor and control our operations, compromise ours or our employees', customers’ and suppliers’ confidential information, or otherwise adversely affect the Company’s operating results or business reputation.
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.
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 and seasonal nature of the Company’s customers’ business and our sales and rental patterns, particularly the Company’s construction customers; • the weather conditions, specifically in our northern markets; • the timeliness of OEM equipment deliveries; • changes in the size of the Company’s rental fleet, the rate at which we rent our fleet, and the price at which we sell equipment from our fleet; • changes in corporate or government spending for commercial and infrastructure projects; • changes in interest rates and related changes in the Company’s interest expense and debt service obligations; • changes or fluctuations in skilled technician headcount levels; • timing of technician non-billable hours primarily associated with holiday, paid time off and training programs; • the effectiveness of integrating acquired businesses and new start-up locations; and • timing of acquisitions and new location openings and related costs.
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.
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. 11 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.
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.
The Company’s 76 branch locations in the U.S. are located in 15 different states, which exposes us to different federal, state, and local regulations and taxation. The Company also has seven locations throughout Canada and acquires inventory from Europe which exposes us to foreign regulations and taxation as well.
Approximately 43% of the Company’s equipment sales and aftermarket parts are purchased from four major manufacturers (Hyster-Yale, Kubota, JCB, and Volvo).
Approximately 47% of the Company’s equipment sales and aftermarket parts are purchased from five major manufacturers (Hyster-Yale, Kubota, JCB, Doppstadt and Volvo).
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’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 our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows 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 we operate; • making it more difficult to refinance or pay our debts as they become due during adverse economic, financial market, or industry conditions; • placing the Company at a competitive disadvantage compared to our 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.
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.
If we determine our goodwill or other intangible assets have become impaired, we may incur impairment charges which would negatively impact our operating results. At December 31, 2023, we had $76.7 million of goodwill and $66.3 million of other intangible assets on our Consolidated Balance Sheet.
The Company’s future operating results could be adversely affected because the Company’s maintenance and repair costs may be higher than estimated.
The Company’s future operating results could be adversely affected because the Company’s maintenance and repair costs on our rental fleet may be higher than anticipated.
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.
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.
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.
Throughout 2023, the Company implemented measures to remediate the ineffective controls then completed the testing of the design and operating effectiveness of the controls. Management has determined the controls are adequately designed and operating effectively and consider this material weakness identified in the prior year to be remediated as of December 31, 2023.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeUnited 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)
Biggest changeUnited States Connecticut (CE 1, MH 1, OTH 1) Maine (CE 1, MH 1) Ohio (CE 2, MD 1) Florida (CE 9, OTH 1) Michigan (CE 12, MH 10, OTH 1) Pennsylvania (CE 2) Illinois (CE 7, MH 4, OTH 1) New Hampshire (CE 2, MH 1) Rhode Island (MH 1) Indiana (CE 1, MH 2) Nevada (MD 1) Vermont (MH 1) Massachusetts (CE 2, MH 5, OTH 1) New York (CE 3, MH 10, OTH 2) Virginia (MH 1) Canada Ontario (CE 1, MD 1, MH 3) Quebec (CE 1, MH 1) 18
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.
We believe 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.
Item 2. Pr operties. 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.
Item 2. Pr operties. As of December 31, 2023, we leased substantially all 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.
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.
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), Master Distribution (MD), and Corporate and Other (OTH) segments. Some locations contain operations in multiple segments but are listed as separate locations below.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 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. Item 4. Mine Safe ty Disclosures. Not applicable. 17 PART II
Biggest changeItem 3. Legal Proceedings. Other than routine legal proceedings incident to our business, there are no material legal proceedings, where the potential liability is not offset by expected insurance proceeds, to which we are a party or to which any of our property is subject. Item 4. Mine Safe ty Disclosures. Not applicable. 19 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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.
Biggest changeDividends During the years ended December 31, 2023 and 2022, we paid quarterly cash dividends totaling $2,500 per share of our Series A Preferred Stock, or $2.50 per depositary share, which was $3.0 million each year.
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.
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, expected capital requirements, compliance with our credit agreements and general financial condition. The payment of any cash dividends is within the discretion of our Board of Directors.
Item 5. Market for Registrant’s Common and Preferred Equity, Related Stoc kholder 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”.
Item 5. Market for Registrant’s Common and Preferred Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is traded on the NYSE under the symbol “ALTG.” Our preferred stock depositary shares are traded on the NYSE under the symbol “ALTG PRA”.
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.
Securities Repurchases On July 6, 2022 the Company's Board approved a share repurchase program authorizing Alta to repurchase shares of our 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.
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.
Subject to applicable rules and regulations, the Company may repurchase shares of our common stock from time to time in the open market or by negotiated transactions.
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 Item 6.
The performance graph comparison assumes $100 was invested in our common stock, Russell 2000 Index and our peer group on February 14, 2020 and all dividends have been reinvested. Ticker 2/14/2020 12/31/2021 12/31/2022 12/31/2023 Alta Equipment Group ALTG 100.00 141.04 128.19 122.17 Peer Group Various 100.00 161.79 149.21 163.80 Russell 2000 Index RUT 100.00 133.05 104.37 120.12 Item 6. [Reserved].
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.
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. These shares were used as consideration in connection with the purchase of Ecoverse.
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.
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. No share repurchases have been made under this program and the Company has $12.5 million of remaining authorization as of December 31, 2023.
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.
Holders As of March 11, 2024, there were 8 active holders of record of our common stock and 1 active holder of record of our depositary shares.
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 ESPP authorizes up to 325,000 shares of common stock to be issued and purchased by employees of the Company through payroll deductions.
Removed
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.
Added
During the years ended December 31, 2023 and 2022, we declared and paid quarterly cash dividends on common stock and dividend equivalents on stock-based compensation totaling $0.228 and $0.114 per share, respectively, which was $7.6 million and $3.7 million, respectively.
Removed
The authorized number of shares is subject to adjustment as provided for in the ESPP. 18 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.
Added
During 2023, 84,554 shares of common stock were purchased by our employees under the ESPP and will be issued in 2024. 20 Performance Graph The following graph compares the cumulative stockholder return of the Company's common stock as of the last trading day of each fiscal year since our initial public offering with that of the Russell 2000 Index and an industry peer group selected by us.
Added
The peer group consists of the following companies: MRC Global Inc.; Herc Holdings Inc.; MarineMax, Inc.; Titan Machinery Inc.; NOW Inc.; OneWater Marine Inc.; Trinity Industries, Inc.; Global Industrial Company; Astec Industries, Inc.; DXP Enterprises, Inc.; America’s Car-Mart, Inc.; H&E Equipment Services, Inc.; and McGrath RentCorp.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAlso included in this section of the financials are non-recurring costs, in particular expenses associated with the extinguishment of debt in 2021 and 2020. 21 Results of Operations Years ended December 31, 2022 and 2021 Consolidated Results Year Ended December 31, Increase (Decrease) 2022 2021 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 )% 22 Percent of Revenue Consolidated Year Ended December 31, 2022 2021 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 2021 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.
Biggest changeInterest expense is driven by our OEM floor plan financing arrangements, a working capital line of credit, our second lien secured notes and our finance lease arrangements. 24 Results of Operations Years ended December 31, 2023 and 2022 Consolidated Results Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 Revenues: New and used equipment sales $ 1,025.9 $ 817.2 $ 208.7 25.5 % Parts sales 278.3 234.8 43.5 18.5 % Service revenues 241.3 206.6 34.7 16.8 % Rental revenues 202.4 180.1 22.3 12.4 % Rental equipment sales 128.9 133.1 (4.2 ) (3.2 )% Total revenues 1,876.8 1,571.8 305.0 19.4 % Cost of revenues: New and used equipment sales 853.6 683.2 170.4 24.9 % Parts sales 183.2 157.4 25.8 16.4 % Service revenues 103.4 90.7 12.7 14.0 % Rental revenues 24.8 22.4 2.4 10.7 % Rental depreciation 110.1 95.5 14.6 15.3 % Rental equipment sales 94.5 103.0 (8.5 ) (8.3 )% Total cost of revenues 1,369.6 1,152.2 217.4 18.9 % Gross profit 507.2 419.6 87.6 20.9 % General and administrative expenses 430.3 362.3 68.0 18.8 % Non-rental depreciation and amortization 22.5 16.5 6.0 36.4 % Total operating expenses 452.8 378.8 74.0 19.5 % Income from operations 54.4 40.8 13.6 33.3 % Other (expense) income: Interest expense, floor plan payable – new equipment (8.4 ) (2.7 ) (5.7 ) 211.1 % Interest expense – other (48.6 ) (29.1 ) (19.5 ) 67.0 % Other income 5.1 1.6 3.5 218.8 % Total other expense, net (51.9 ) (30.2 ) (21.7 ) 71.9 % Income before taxes 2.5 10.6 (8.1 ) (76.4 )% Income tax (benefit) provision (6.4 ) 1.3 (7.7 ) NM Net income 8.9 9.3 (0.4 ) (4.3 )% Preferred stock dividends (3.0 ) (3.0 ) — — Net income available to common stockholders $ 5.9 $ 6.3 $ (0.4 ) (6.3 )% NM - calculated change not meaningful Percent of Revenues Year Ended December 31, 2023 2022 Revenues: New and used equipment sales 54.6 % 52.0 % Parts sales 14.8 % 14.9 % Service revenues 12.9 % 13.1 % Rental revenues 10.8 % 11.5 % Rental equipment sales 6.9 % 8.5 % Total revenues 100.0 % 100.0 % Cost of revenues: New and used equipment sales 45.5 % 43.5 % Parts sales 9.8 % 10.0 % Service revenues 5.5 % 5.8 % Rental revenues 1.3 % 1.4 % Rental depreciation 5.9 % 6.0 % Rental equipment sales 5.0 % 6.6 % Total cost of revenues 73.0 % 73.3 % Gross profit 27.0 % 26.7 % 25 Non-GAAP Financial Measure: Organic Revenues Organic Revenues Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 Total revenues $ 1,876.8 $ 1,571.8 $ 305.0 19.4 % Acquisitions revenues 139.4 25.0 Organic revenues: New and used equipment sales 941.0 808.0 133.0 16.5 % Parts sales 255.7 229.0 26.7 11.7 % Service revenues 228.3 202.5 25.8 12.7 % Rental revenues 185.2 175.3 9.9 5.6 % Rental equipment sales 127.2 132.0 (4.8 ) (3.6 )% Total organic revenues $ 1,737.4 $ 1,546.8 $ 190.6 12.3 % The above table contains a non-GAAP financial measure.
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 assets acquired and liabilities assumed (including contingent purchase consideration) are recorded based on their respective fair values at the date of acquisition. Such fair 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.
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.
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 fund the preferred stock and common stock dividends.
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.
As a part of our income tax provision, we must also evaluate the likelihood 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.
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.
Used equipment sales in our territories, like new equipment sales, generate parts and service 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.
In response to changing economic conditions, we have the flexibility to modify our capital expenditures, especially as it relates to rental fleet. 29 To service our debt, we will require a significant amount of cash.
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.
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.
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 43% of our employees are skilled service technicians.
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.
Personnel costs are comprised of hourly and salaried wages for administrative employees, including incentive compensation and employee benefits, such as 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.
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.
The original acquisition cost of our rental fleet excludes the $8.9 million of assets associated with our guaranteed purchase obligations, which are assets that are not in our day-to-day operational control. In addition to being a core business, our rental business also creates cross-selling opportunities for us in our sales and product support activities. Rental equipment sales.
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.
This discussion contains “forward-looking statements” reflecting Alta’s current expectations, estimates, and assumptions concerning events and financial trends that may affect our 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.
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.
The principal methods of depreciation used are straight-line basis over the estimated useful lives or percentage of rental revenues 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.
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.
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 operations, balance sheets or statements of cash flows of the company.
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.
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 8, Floor Plans and Note 9, Long-term Debt.
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. 30 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.
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.
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.
Occupancy costs are comprised of all expenses related to our facility infrastructure, including rent, utilities, property taxes and building insurance. Other expense, net. This section of the Consolidated Statements of Operations is mostly comprised of interest expense and other miscellaneous items that result in income or expense.
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.
Based on our current level of operations and given the current state of the capital markets, we believe our cash flows from operations, available cash, and 33 available borrowings under the line of credit will be adequate to meet our future liquidity needs for the foreseeable future.
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.
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 $31.0 million in cash as of December 31, 2023.
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.
Rental revenues. 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.
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.
The majority of our parts inventory is made up of OEM replacement parts for those OEM’s with which we have exclusive agreements to sell new equipment. Service revenues. We provide maintenance and repair services for customer-owned equipment and we maintain our own rental fleet.
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 20 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.
Our operating expenses consist principally of selling, general and administrative expenses, which primarily include 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 floor plan payables, finance leases, line of credit, and secured second lien notes.
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.
As discussed below, we regularly review impairment indicators. New and used equipment inventories, long-lived assets (primarily rental equipment), goodwill, and other intangible assets generally represent the largest component of our acquisitions.
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.
This gross rental fleet capital expenditure was offset by sales proceeds of rental equipment of approximately $128.9 million for the period ended December 31, 2023 as our business model is to sell lightly used inventory to customers from our rental fleet to increase field population in our geographies.
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.
Equipment inventory and rental fleet acquired in the transaction are 34 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.
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.
Cost of parts sales represents the average 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 sales). 23 Services revenues. Cost of service revenues primarily represents the labor costs attributable to services provided for the maintenance and repair of customer-owned equipment.
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.
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 $591.9 million as of December 31, 2023.
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.
Training, paid time off, and other non-billable costs of maintaining our expert technicians are recorded in this line item in addition to the costs of direct customer-billable labor. Rental revenues. 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.
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.
Organically, the segment revenues increased 11.8% based on strong customer demand, a favorable pricing environment and our OEMs ability to produce and deliver more new equipment in 2023 versus 2022.
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.
Liquidity and Capital Resources Years ended December 31, 2023 and 2022 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, 2023, operating activities resulted in net cash provided by operations of $63.8 million.
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.
Pursuant to the requirements of Regulation G, we have provided a reconciliation of organic revenues 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.
Gross profit (GP): Year Ended December 31, Increase (Decrease) 2022 2021 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.
Gross profit (GP): Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 GP% GP% GP% New and used equipment sales 13.8 % 14.1 % (0.3 )% Parts sales 30.9 % 30.4 % 0.5 % Service revenues 57.6 % 56.4 % 1.2 % Rental revenues 22.4 % 20.9 % 1.5 % Rental equipment sales 26.4 % 21.9 % 4.5 % Segment gross profit 22.9 % 22.3 % 0.6 % Construction Equipment gross profit increased by 60 basis points to 22.9% from 22.3% for the year ended December 31, 2023 as compared to 2022, with overall margin improvements reflective of the general business climate and positive demand factors of the industry.
Gross profit (GP): Year Ended December 31, Increase (Decrease) 2022 2021 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.
Gross profit (GP): Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 GP% GP% GP% New and used equipment sales 19.9 % 20.4 % (0.5 )% Parts sales 37.9 % 37.4 % 0.5 % Service revenues 56.9 % 55.8 % 1.1 % Rental revenues 52.2 % 59.5 % (7.3 )% Rental equipment sales 34.6 % 40.0 % (5.4 )% Segment gross profit 33.5 % 34.4 % (0.9 )% Material Handling gross profit for the year ended December 31, 2023 decreased 90 basis points to 33.5% compared to the same period in 2022, remaining relatively consistent overall.
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.
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. Refer to Note 2, Summary of Significant Accounting Policies, and Note 12, Income Taxes, herein for more information.
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.
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.
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.
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.
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.
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 credit losses is charged with the write-off when deemed uncollectible by management. Write-offs of such receivables require management approval based on specified dollar thresholds.
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.
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.
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.
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. Estimated useful lives vary based upon type of equipment.
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.
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 (e.g., net of accumulated depreciation) of rental equipment sold from our rental fleet. Operating expenses. These costs are comprised of three main components: personnel, operational and occupancy costs.
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.
The non-GAAP financial measure used is organic revenues and growth rates associated with organic revenues. We define organic revenues growth as revenue growth excluding the impact of acquisitions that do not appear fully in both periods in the current and prior years.
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.
This was mainly due to $123.3 million purchases of rental equipment, non-rental property and equipment, and equipment contracted under guaranteed purchase obligations, as well as Burris and Ault acquisition activity partially offset by $0.5 million proceeds from the sale of non-rental property and equipment. For the year ended December 31, 2022, our cash used in investing activities was $162.6 million.
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.
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.
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.
Rental equipment sales decreased organically by 3.6% for the year ended December 31, 2023 as compared to the same period last year as we strategically balance the decision to retain fleet to meet rental demand but still accommodate sales into our territories to meet demand for used equipment and 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. 23 Gross profit (GP): Year Ended December 31, Increase (Decrease) 2022 2021 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.
Gross profit (GP): Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 GP% GP% GP% New and used equipment sales 16.8 % 16.4 % 0.4 % Parts sales 34.2 % 33.0 % 1.2 % Service revenues 57.1 % 56.1 % 1.0 % Rental revenues 33.3 % 34.5 % (1.2 )% Rental equipment sales 26.7 % 22.6 % 4.1 % Consolidated gross profit 27.0 % 26.7 % 0.3 % Consolidated gross profit increased by 30 basis point from 26.7% in the year ended December 31, 2022 to 27.0% over the same period in 2023.
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.
The favorable impact was mainly due to $114.9 million of net borrowings under our line of credit, primarily related to a draw on the line to fund the YIT and Ecoverse acquisitions, net borrowings of $28.0 million related to non-manufacturer floor plans, and $0.7 million related to other financing activities.
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.
Our cash flows from operating activities related to net income adjusted for non-cash income and expenses, primarily depreciation and amortization, the gain on sale of rental equipment, inventory obsolescence and bad debt reserves, and stock-based compensation, generated $101.0 million for the twelve months ended December 31, 2022. This was partially offset by $75.0 million of net working capital investments.
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.
Organically, the segment revenues increased 12.6% for the year ended December 31, 2023 based on a favorable demand backdrop, elevated pricing environment and the ability of our OEMs to deliver more new equipment in 2023 versus 2022 allowing for throughput on our equipment sales backlog.
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.
This was mainly due to $76.7 million purchases of rental equipment and non-rental property and equipment and $86.7 million use of cash for the YIT and Ecoverse acquisitions and adjustments to the purchase prices of two of our 2021 acquisitions partially offset by $1.2 million of proceeds from the sale of non-rental property and equipment. Cash Flow from Financing Activities.
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.
New and used equipment sales margins increased 40 basis point to 16.8%, consistent overall with prior year but reflective of a favorable pricing environment for new and used equipment, particularly in the first half of 2023, and our focus on providing more customized equipment solutions which yield a higher gross margin versus standard products.
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. 26 Construction Equipment Results Year Ended December 31, Increase (Decrease) 2022 2021 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, 2022 2021 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 % 27 Organic Revenue Year Ended December 31, Increase (Decrease) 2022 2021 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.
Construction Equipment Results Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 Revenues: New and used equipment sales $ 597.9 $ 508.2 $ 89.7 17.7 % Parts sales 170.1 149.0 21.1 14.2 % Service revenues 108.2 94.4 13.8 14.6 % Rental revenues 124.8 116.6 8.2 7.0 % Rental equipment sales 123.7 127.6 (3.9 ) (3.1 )% Total revenues 1,124.7 995.8 128.9 12.9 % Cost of revenues: New and used equipment sales 515.5 436.7 78.8 18.0 % Parts sales 117.5 103.7 13.8 13.3 % Service revenues 45.9 41.2 4.7 11.4 % Rental revenues 15.1 16.3 (1.2 ) (7.4 )% Rental depreciation 81.8 75.9 5.9 7.8 % Rental equipment sales 91.1 99.7 (8.6 ) (8.6 )% Total cost of revenues 866.9 773.5 93.4 12.1 % Gross profit 257.8 222.3 35.5 16.0 % General and administrative expenses 211.6 178.8 32.8 18.3 % Non-rental depreciation and amortization 10.7 8.7 2.0 23.0 % Total operating expenses 222.3 187.5 34.8 18.6 % Income from operations 35.5 34.8 0.7 2.0 % Other (expense) income: Interest expense, floor plan payable – new equipment (4.8 ) (1.5 ) (3.3 ) 220.0 % Interest expense – other (28.3 ) (16.2 ) (12.1 ) 74.7 % Other income (expense) 4.6 (2.9 ) 7.5 (258.6 )% Total other expense, net (28.5 ) (20.6 ) (7.9 ) 38.3 % Income before taxes $ 7.0 $ 14.2 $ (7.2 ) (50.7 )% 29 Percent of Revenues Year Ended December 31, 2023 2022 Revenues: New and used equipment sales 53.2 % 51.0 % Parts sales 15.1 % 15.0 % Service revenues 9.6 % 9.5 % Rental revenues 11.1 % 11.7 % Rental equipment sales 11.0 % 12.8 % Total revenues 100.0 % 100.0 % Cost of revenues: New and used equipment sales 45.9 % 44.0 % Parts sales 10.4 % 10.4 % Service revenues 4.1 % 4.1 % Rental revenues 1.3 % 1.6 % Rental depreciation and amortization 7.3 % 7.6 % Rental equipment sales 8.1 % 10.0 % Total cost of revenues 77.1 % 77.7 % Gross profit 22.9 % 22.3 % Non-GAAP Financial Measure: Organic Revenues Organic Revenues Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 Total revenues $ 1,124.7 $ 995.8 $ 128.9 12.9 % Acquisitions revenues 11.0 — Organic revenues: New and used equipment sales 592.9 508.2 84.7 16.7 % Parts sales 167.4 149.0 18.4 12.3 % Service revenues 107.5 94.4 13.1 13.9 % Rental revenues 122.2 116.6 5.6 4.8 % Rental equipment sales 123.7 127.6 (3.9 ) (3.1 )% Total organic revenues $ 1,113.7 $ 995.8 $ 117.9 11.8 % Revenues: Construction Equipment segment revenues increased by 12.9% to $1,124.7 million for the year ended December 31, 2023 as compared to the same period last year.
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.
Importantly, on an organic basis product support revenues increased 11.2%, as technician headcount and pricing showed improvements year-over-year. Rental revenues increased 7.3%, on an organic basis, for the year ended December 31, 2023 as compared to the same period last year on higher rental rates and a higher nominal level of fleet on rent.
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.
Additionally, there were net borrowings of $8.7 million related to non-manufacturer floor plans for the year. These cash inflows were partially offset by payments of $10.6 million for preferred and common stock dividends and $2.1 million related to other financing activities. For the year ended December 31, 2022, cash provided by financing activities was $136.9 million.
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.
While new and used equipment gross margins have remained relatively consistent year over year, we have gained 50 basis point in parts gross margin during 2023 when compared to the same period last 28 year primarily related to the full period impact of the YIT acquisition, which has a favorable parts gross margin when compared to our Material Handling segment overall.
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.
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 service revenues for us.
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.
Our gross rental fleet capital expenditures for the period ended December 31, 2023 were approximately $242.4 million, including $180.2 million of transfers from new and used inventory to rental fleet.
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.
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.
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.
These principal costs and expenses are described further below: New equipment sales. Cost of new equipment sold consists of the total acquisition costs of the new equipment we purchase from third parties. Used equipment sales.
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. 24 Material Handling Results Year Ended December 31, Increase (Decrease) 2022 2021 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, 2022 2021 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 % 25 Organic Revenue Year Ended December 31, Increase (Decrease) 2022 2021 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.
Material Handling Results Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 Revenues: New and used equipment sales $ 367.6 $ 305.2 $ 62.4 20.4 % Parts sales 99.5 84.4 15.1 17.9 % Service revenues 132.8 112.1 20.7 18.5 % Rental revenues 76.4 63.5 12.9 20.3 % Rental equipment sales 5.2 5.5 (0.3 ) (5.5 )% Total revenues 681.5 570.7 110.8 19.4 % Cost of revenues: New and used equipment sales 294.3 242.9 51.4 21.2 % Parts sales 61.8 52.8 9.0 17.0 % Service revenues 57.3 49.5 7.8 15.8 % Rental revenues 9.7 6.1 3.6 59.0 % Rental depreciation 26.8 19.6 7.2 36.7 % Rental equipment sales 3.4 3.3 0.1 3.0 % Total cost of revenues 453.3 374.2 79.1 21.1 % Gross profit 228.2 196.5 31.7 16.1 % General and administrative expenses 187.8 164.9 22.9 13.9 % Non-rental depreciation and amortization 8.1 7.2 0.9 12.5 % Total operating expenses 195.9 172.1 23.8 13.8 % Income from operations 32.3 24.4 7.9 32.4 % Other (expense) income: Interest expense, floor plan payable – new equipment (2.7 ) (1.2 ) (1.5 ) 125.0 % Interest expense – other (15.4 ) (10.5 ) (4.9 ) 46.7 % Other income 0.5 4.4 (3.9 ) (88.6 )% Total other expense, net (17.6 ) (7.3 ) (10.3 ) 141.1 % Income before taxes $ 14.7 $ 17.1 $ (2.4 ) (14.0 )% 27 Percent of Revenues Year Ended December 31, 2023 2022 Revenues: New and used equipment sales 53.9 % 53.5 % Parts sales 14.6 % 14.8 % Service revenues 19.5 % 19.6 % Rental revenues 11.2 % 11.1 % Rental equipment sales 0.8 % 1.0 % Total revenues 100.0 % 100.0 % Cost of revenues: New and used equipment sales 43.2 % 42.6 % Parts sales 9.1 % 9.3 % Service revenues 8.4 % 8.7 % Rental revenues 1.4 % 1.1 % Rental depreciation 3.9 % 3.3 % Rental equipment sales 0.5 % 0.6 % Total cost of revenues 66.5 % 65.6 % Gross profit 33.5 % 34.4 % Non-GAAP Financial Measure: Organic Revenues Organic Revenues Year Ended December 31, Increase (Decrease) 2023 2022 2023 versus 2022 Total revenues $ 681.5 $ 570.7 $ 110.8 19.4 % Acquisitions revenues 61.1 19.7 Organic revenues: New and used equipment sales 344.9 299.8 45.1 15.0 % Parts sales 88.3 80.0 8.3 10.4 % Service revenues 120.8 108.1 12.7 11.7 % Rental revenues 63.0 58.7 4.3 7.3 % Rental equipment sales 3.4 4.4 (1.0 ) (22.7 )% Total organic revenues $ 620.4 $ 551.0 $ 69.4 12.6 % Revenues: Material Handling segment revenues increased by $110.8 million to $681.5 million for the year ended December 31, 2023 as compared to the same period last year.
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.
Strategic Acquisitions in 2023 and 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.
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.
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 nationally recognized equipment manufacturers.
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.
Cash Flow from Investing Activities . For the year ended December 31, 2023, our cash used in investing activities was $122.8 million.
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.
However, when appropriate, we adjust these carrying values for factors such as collectability, existence, and consistency with Company accounting policies.
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.
Additionally, the large increase in equipment sales resulted in higher sales commission expense. Further, inflationary labor market factors drove increases in employment costs, such as wages and benefits, beyond incremental headcount additions. Other expense, net: Consolidated other expense, net for the year ended December 31, 2023 was $51.9 million compared to $30.2 million for the year ended December 31, 2022.
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.
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.
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.
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.
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.
The increase in equipment availability in 2023 also allowed us to replenish and strategically grow our rental fleet. Additionally, and notably, supply chain issues over the past three years did not materially impact our ability to source replacement parts for our service operation, as our OEMs have prioritized the production and delivery of replacement parts to dealers.
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.
Operating expenses: Consolidated operating expenses increased by 19.5% to $452.8 million for the year ended December 31, 2023 compared to the same period last year, primarily driven by the full period and incremental impact from our 2022 and 2023 acquisitions, respectively, and additional expenses to support our organic growth, such as labor costs supporting an overall headcount increase, sales-related marketing expenditures, and service vehicle costs associated with a growing skilled technician base.
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.
We realized a 120 basis point decrease in rental revenues gross margin for the year ended December 31, 2023, largely related to replenishing and increasing the size of our rental fleet resulting in higher depreciation expense when compared to last year.
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 Asset s Refer to Note 2, Summary of Significant Accounting Policies, herein for more information.
See Note 2 to our consolidated financial statements for a summary of our significant accounting policies. Revenue Recognition Refer to Note 2, Summary of Significant Accounting Policies, and Note 3, Revenue Recognition, herein for more information. Impairment of Goodwill and Long-lived Asset s Refer to Note 2, Summary of Significant Accounting Policies, herein for more information.
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.
Operating expenses: Operating expenses increased by $23.8 million to $195.9 million for the year ended December 31, 2023 as compared to the same period last year, mainly due to the full period impact from the YIT acquisition and sales-related variable costs, such as equipment sales commissions, labor and operating input costs that support organic revenue growth, as described previously.
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.
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.
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.
Rental revenues increased 4.8% for the year ended December 31, 2023 as compared to the same period last year primarily attributable to an increased rental rate environment existing between the comparable periods and a greater amount of fleet on rent during 2023.
As of December 31, 2022, we had $264.3 million of available borrowings under the revolving line of credit and floor plans.
As of December 31, 2023, we had $187.8 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 accounting principles generally accepted in the United States of America (“U.S.
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.
Changes in intercompany allocation of shared service expenses also contributes to the year-over-year variance. Other (expense) income, net: Other expenses increased by $10.3 million to $17.6 million for the year ended December 31, 2023 as compared to the same period last year.
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. 28 Liquidity and Capital Resources Year ended December 31, 2022, 2021 Cash Flows Cash Flow from Operating Activities .
Other (expense) income, net: Construction Equipment other expense, net increased by $7.9 million to $28.5 million for the year ended December 31, 2023 as compared to the same period in 2022 primarily due to the increase in interest rates on our floating-rate debt, the fourth quarter 2023 acquisition of Ault, and the interest expense related to a larger rental fleet and higher inventory levels partially offset by the aforementioned change in shared service function intercompany segment allocations.
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. 19 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.
Equipment Inventory Availability, Rental Fleet Investment and Product Support Throughout 2021 and 2022, our industry was unfavorably impacted by equipment supply chain constraints leading to shortages across construction and material handling equipment categories and limiting our ability to meet customer demand and potentially increase our market share.
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.
To that end, we completed four notable acquisitions in 2023 and 2022, that we believe, both immediately and over the long term, will be accretive to our financial performance.
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.
The favorable pricing environment coupled with our flexible rent-to-sell model, which allows us to sell previously depreciated rental fleet, led to a 410 basis point increase in rental equipment sales margin when comparing the year-over-year periods despite lower sales volume in the category.
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.
The increase is primarily due to an increase in interest expense due to higher interest rates and more debt outstanding due to recent debt-financed acquisitions and carrying costs associated with a higher level of inventory and rental fleet.
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.
Cash flows from operating activities were favorably impacted by $128.9 million due to proceeds from the sale of rental equipment, $122.5 million in net inflows related to manufacturer floor plans, and a $3.8 million net change in prepaid expenses and other assets and leases, deferred revenue, and other liabilities and unfavorably impacted by a $7.3 million decrease in accounts payable, accrued expenses, customer deposits, and other current liabilities. 32 For the year ended December 31, 2022, operating activities resulted in net cash provided by operations of $26.0 million.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSee 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.
Biggest changeWe employ financial instruments to manage the Company's exposure to 35 changes in interest rates, diesel and unleaded fuel and foreign currencies. See Note 14, 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.
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.
As of December 31, 2023, 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 $5.1 million and $3.2 million, respectively.
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.
As of December 31, 2023 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, 2023 and 2022, we had $317.5 million and $219.5 million, respectively, outstanding borrowings under the ABL Facility.
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 the ABL Facility are based, at our option, on (i) a floating rate based on the 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 Facility based on the quarterly average excess availability under the ABL Facility.
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.
The amount of variable rate indebtedness outstanding may fluctuate significantly. See Note 8, Floor Plans, and Note 9, Long-Term Debt, in our consolidated financial statements for additional information concerning the terms of our variable rate debt. We have a fixed rate on the Senior Secured Second Lien Notes (the "Notes") of $315.0 million which are due in 2026.
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.
Foreign currency exchange rate risk: Due to our international operations, a portion of our revenues, cost of revenues, and operating expenses are subject to foreign currency exchange rate risk.
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.
At December 31, 2023 and 2022, we had $397.5 million and $256.9 million, respectively, outstanding borrowings under the Floor Plan Facilities.
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.
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.
Item 7A. Quantitative and Qualitat ive 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.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Our exposure to market risk primarily consists of interest rate risk associated with our variable and fixed rate debt, prices of certain commodities and foreign currency exchange rate risks.
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.
We did not have significant exposure to changing interest rates as of December 31, 2023 on the fixed rate Notes. For additional information concerning the terms of our fixed rate debt, see Note 9, Long-Term Debt. Commodity price risk: The market prices of diesel and unleaded fuels are unpredictable and can fluctuate significantly.
Added
Because of the volume of fuel we purchase each year, a significant increase in the price of fuel could adversely affect our business and reduce our operating margins. To manage a portion of this risk, we enter into fixed price swap contracts to purchase gasoline and diesel fuel related to forecasted fuel purchases.
Added
For the purchases of unleaded and diesel fuel that we expect to purchase at market prices in the next 12 months, each $0.10 per gallon increase in the price of diesel and unleaded fuel, holding other variables constant, would not have a material impact on our pre-tax income when including the fixed price swap contracts.
Added
Based upon balances and exchange rates as of December 31, 2023, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows. 36 Ite m 8. Financial Statements and Supplementary Data.
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REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Alta Equipment Group Inc.
Added
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alta Equipment Group Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for the years ended December 31, 2023 and 2022, and the related notes, and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").
Added
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.
Added
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.
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Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
Added
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 audits in accordance with the standards of the PCAOB.
Added
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Added
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Added
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Added
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Added
Revenue Recognition — Refer to Notes 2 and 3 to the financial statements Critical Audit Matter Description The Company’s revenues from the sale of new and used equipment and rental 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.
Added
Revenues from the sale of parts are recognized at the time of pick-up by the customer for over-the-counter sales transactions. For parts that are shipped to a customer, revenues are recognized at the time of shipment. The Company recognizes periodic maintenance service revenues at the time such services are completed.
Added
The processing and recording of the Company’s revenue transactions involves a combination of automated and manual processes.
Added
We identified the Company’s revenue recognition processes for new and used equipment sales, parts sales, service revenues, and rental equipment sales as a critical audit matter as the Company has a significant volume of revenue transactions throughout the year that rely 37 on manual processes to generate accurate data to record revenue when the customer obtains control of the promised good or when services are completed.
Added
This required an increased extent of effort to audit these revenue transactions.
Added
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s revenue recognition for new and used equipment sales, parts sales, service revenues, and rental equipment sales included the following, among others: • We obtained an understanding of the nature of the revenue recognition process through inquiry with the Company personnel responsible for revenue recognition, walkthrough of individual transactions, and review of contracts with the customers. • We created data visualizations to evaluate trends in the transactional revenue data. • For a sample of new and used equipment sales, parts sales, service revenues, and rental equipment sales transactions, we performed detail transaction testing of the accuracy, completeness, and timing of recorded revenue by agreeing the amounts recognized to source documents and testing the mathematical accuracy of the transactions. • We developed an independent expectation of new and used equipment sales in the Construction Equipment segment using analytical procedures and considering relevant current and historical information and compared our expectations to the recorded revenue. /s/ Deloitte & Touche LLP Detroit, Michigan March 14, 2024 We have served as the Company's auditor since 2022. 38 REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Alta Equipment Group Inc. and Subsidiaries Opinion on the Financial Statements We have audited the consolidated balance sheet of Alta Equipment Group Inc. and Subsidiaries (the “Company”) as of December 31, 2021, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements).
Added
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Added
Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.
Added
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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.
Added
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 the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Added
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Added
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Added
We served as the Company’s auditor from 2019 through 2021. /s/ UHY LLP Sterling Heights, Michigan March 31, 2022 39 ALTA EQUIPMENT GROUP INC.
Added
AND SUBSIDIARIES CONSOLIDATED B ALANCE SHEETS (in millions, except share and per share amounts) December 31, 2023 December 31, 2022 ASSETS Cash $ 31.0 $ 2.7 Accounts receivable, net of allowances of $ 12.4 and $ 13.0 as of December 31, 2023 and 2022, respectively 249.3 232.8 Inventories, net 530.7 399.7 Prepaid expenses and other current assets 27.0 28.1 Total current assets 838.0 663.3 NON-CURRENT ASSETS Property and equipment, net 464.8 377.8 Operating lease right-of-use assets, net 110.9 113.6 Goodwill 76.7 69.2 Other intangible assets, net 66.3 60.7 Other assets 14.2 6.0 TOTAL ASSETS $ 1,570.9 $ 1,290.6 LIABILITIES AND STOCKHOLDERS’ EQUITY Floor plan payable – new equipment $ 297.8 $ 211.5 Floor plan payable – used and rental equipment 99.5 45.3 Current portion of long-term debt 7.7 4.2 Accounts payable 97.0 90.8 Customer deposits 17.4 27.9 Accrued expenses 59.7 55.1 Current operating lease liabilities 15.9 14.8 Current deferred revenue 16.2 14.1 Other current liabilities 23.9 7.5 Total current liabilities 635.1 471.2 NON-CURRENT LIABILITIES Line of credit, net 315.9 217.5 Long-term debt, net of current portion 312.3 311.2 Finance lease obligations, net of current portion 31.1 15.4 Deferred revenue, net of current portion 4.2 4.9 Guaranteed purchase obligations, net of current portion 2.5 4.7 Long-term operating lease liabilities, net of current portion 99.6 101.9 Deferred tax liability 7.7 6.4 Other liabilities 12.8 17.6 TOTAL LIABILITIES 1,421.2 1,150.8 CONTINGENCIES - NOTE 11 STOCKHOLDERS’ EQUITY Preferred stock, $ 0.0001 par value per share, 1,000,00 0 shares authorized, 1,200,000 Depositary Shares representing a 1/1000 th fractional interest in a share of 10 % Series A Cumulative Perpetual Preferred Stock, $ 0.0001 par value per share, issued and outstanding at both December 31, 2023 and 2022 — — Common stock, $ 0.0001 par value per share, 200,000,000 shares authorized; 32,369,820 and 32,194,243 issued and outstanding at December 31, 2023 and 2022, respectively — — Additional paid-in capital 233.8 222.8 Treasury stock at cost, 862,182 shares of common stock held at both December 31, 2023 and 2022 ( 5.9 ) ( 5.9 ) Accumulated deficit ( 76.4 ) ( 74.2 ) Accumulated other comprehensive loss ( 1.8 ) ( 2.9 ) TOTAL STOCKHOLDERS’ EQUITY 149.7 139.8 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,570.9 $ 1,290.6 The accompanying notes are an integral part of these consolidated financial statements. 40 ALTA EQUIPMENT GROUP INC.
Added
AND SUBSIDIARIES CONSOLIDATED STA TEMENTS OF OPERATIONS (in millions, except share and per share amounts) Year Ended December 31, 2023 2022 2021 Revenues: New and used equipment sales $ 1,025.9 $ 817.2 $ 568.8 Parts sales 278.3 234.8 178.5 Service revenues 241.3 206.6 165.5 Rental revenues 202.4 180.1 155.5 Rental equipment sales 128.9 133.1 144.5 Total revenues 1,876.8 1,571.8 1,212.8 Cost of revenues: New and used equipment sales 853.6 683.2 478.0 Parts sales 183.2 157.4 123.4 Service revenues 103.4 90.7 68.2 Rental revenues 24.8 22.4 20.6 Rental depreciation 110.1 95.5 85.3 Rental equipment sales 94.5 103.0 122.9 Total cost of revenues 1,369.6 1,152.2 898.4 Gross profit 507.2 419.6 314.4 General and administrative expenses 430.3 362.3 285.9 Non-rental depreciation and amortization 22.5 16.5 10.5 Total operating expenses 452.8 378.8 296.4 Income from operations 54.4 40.8 18.0 Other (expense) income: Interest expense, floor plan payable – new equipment ( 8.4 ) ( 2.7 ) ( 1.7 ) Interest expense – other ( 48.6 ) ( 29.1 ) ( 22.3 ) Other income 5.1 1.6 0.7 Loss on extinguishment of debt — — ( 11.9 ) Total other expense, net ( 51.9 ) ( 30.2 ) ( 35.2 ) Income (loss) before taxes 2.5 10.6 ( 17.2 ) Income tax (benefit) provision ( 6.4 ) 1.3 3.6 Net income (loss) 8.9 9.3 ( 20.8 ) Preferred stock dividends ( 3.0 ) ( 3.0 ) ( 2.6 ) Net income (loss) available to common stockholders $ 5.9 $ 6.3 $ ( 23.4 ) Basic income (loss) per share $ 0.18 $ 0.20 $ ( 0.74 ) Diluted income (loss) per share $ 0.18 $ 0.20 $ ( 0.74 ) Basic weighted average common shares outstanding 32,447,754 32,099,247 31,706,329 Diluted weighted average common shares outstanding 32,877,507 32,301,663 31,706,329 The accompanying notes are an integral part of these consolidated financial statements. 41 ALTA EQUIPMENT GROUP INC.
Added
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions) Year Ended December 31, 2023 2022 2021 Net income (loss) $ 8.9 $ 9.3 $ ( 20.8 ) Other comprehensive income (loss): Foreign currency translation adjustments 1.6 ( 1.5 ) — Change in fair value of derivative, net of tax ( 0.5 ) ( 1.4 ) — Total other comprehensive income (loss) (1) 1.1 ( 2.9 ) — Comprehensive income (loss) $ 10.0 $ 6.4 $ ( 20.8 ) (1) There were no material reclassifications from accumulated other comprehensive income (loss) reflected in Total other comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021.
Added
There were no material taxes associated with Total other comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021 . The accompanying notes are an integral part of these consolidated financial statements. 42 ALTA EQUIPMENT GROUP INC.
Added
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions, except share and per share amounts) Years Ended December 31, 2023, 2022 and 2021 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, 2020 1,200,000 $ — 30,018,502 $ — $ 216.2 $ ( 53.4 ) $ ( 5.9 ) $ — $ 156.9 Net loss — — — — — ( 20.8 ) — — ( 20.8 ) Dividends on preferred stock, $ 2.14 per share — — — — — ( 2.6 ) — — ( 2.6 ) Stock-based compensation — — 65,000 — 1.2 — — — 1.2 Warrants exchanged into common stock — — 2,279,874 — — — — — — Balance at December 31, 2021 1,200,000 $ — 32,363,376 $ — $ 217.4 $ ( 76.8 ) $ ( 5.9 ) $ — $ 134.7 Net income — — — — — 9.3 — — 9.3 Dividends on preferred stock, $ 2.50 per share — — — — — ( 3.0 ) — — ( 3.0 ) Dividends on common stock and dividend equivalent on stock-based compensation, $ 0.114 per share — — — — — ( 3.7 ) — — ( 3.7 ) Stock-based compensation — — 90,649 — 2.7 — — — 2.7 Foreign currency translation adjustments — — — — — — — ( 1.5 ) ( 1.5 ) Change in fair value of derivative, net of tax — — — — — — — ( 1.4 ) ( 1.4 ) Shares issued for acquisition — — 212,400 — 2.7 — — — 2.7 Repurchase of common stock (1) — — ( 472,182 ) — — — — — — Balance at December 31, 2022 1,200,000 $ — 32,194,243 $ — $ 222.8 $ ( 74.2 ) $ ( 5.9 ) $ ( 2.9 ) $ 139.8 Net income — — — — — 8.9 — — 8.9 Dividends on preferred stock, $ 2.50 per share — — — — — ( 3.0 ) — — ( 3.0 ) Dividends on common stock and dividend equivalent on stock-based compensation, $ 0.228 per share — — — — — ( 7.6 ) — — ( 7.6 ) Impact of adoption of new accounting standard (Note 2) — — — — — ( 0.5 ) — — ( 0.5 ) Stock-based compensation — — 175,577 — 4.3 — — — 4.3 Foreign currency translation adjustments — — — — — — — 1.6 1.6 Change in fair value of derivative, net of tax — — — — — — — ( 0.5 ) ( 0.5 ) Contingent consideration classified as equity — — — — 6.3 — — — 6.3 Proceeds from stockholder short-swing profits — — — — 0.4 — — — 0.4 Balance at December 31, 2023 1,200,000 $ — 32,369,820 $ — $ 233.8 $ ( 76.4 ) $ ( 5.9 ) $ ( 1.8 ) $ 149.7 (1) Correction of previously disclosed shares repurchased in 2020, not previously reported as a reduction of common stock shares outstanding.
Added
Amount is immaterial to the consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements. 43 ALTA EQUIPMENT GROUP INC.
Added
AND SUBSIDIARIES CONSOLIDATED STATE MENTS OF CASH FLOWS (in millions) Year Ended December 31, 2023 2022 2021 OPERATING ACTIVITIES Net income (loss) $ 8.9 $ 9.3 $ ( 20.8 ) Adjustments to reconcile net income to net cash flows used in operating activities: Depreciation and amortization 132.6 112.0 95.8 Amortization of debt discount and debt issuance costs 2.0 1.8 2.0 Imputed interest 1.0 0.3 0.2 Loss (gain) on sale of property and equipment 0.2 ( 0.2 ) ( 0.1 ) Gain on sale of rental equipment ( 34.4 ) ( 30.1 ) ( 21.6 ) Provision for inventory obsolescence 2.2 1.4 0.9 Provision for losses on accounts receivable 7.2 5.0 4.2 Loss on debt extinguishment — — 11.9 Change in fair value of derivative instruments ( 0.6 ) — — Stock-based compensation expense 4.3 2.7 1.2 Gain on bargain purchase of business ( 1.5 ) — — Changes in deferred income taxes ( 10.1 ) ( 1.2 ) 3.6 Changes in assets and liabilities, net of acquisitions: Accounts receivable ( 16.6 ) ( 34.7 ) ( 40.7 ) Inventories ( 286.3 ) ( 272.6 ) ( 154.1 ) Proceeds from sale of rental equipment 128.9 133.1 144.5 Prepaid expenses and other assets 0.5 ( 4.1 ) ( 10.7 ) Manufacturers floor plans payable 122.5 77.3 ( 14.6 ) Accounts payable, accrued expenses, customer deposits, and other current liabilities 7.3 26.7 30.2 Leases, deferred revenue, net of current portion and other liabilities ( 4.3 ) ( 0.7 ) ( 1.2 ) Net cash provided by operating activities 63.8 26.0 30.7 INVESTING ACTIVITIES Expenditures for rental equipment ( 62.2 ) ( 63.9 ) ( 42.3 ) Expenditures for property and equipment ( 12.4 ) ( 12.8 ) ( 8.1 ) Proceeds from sale of property and equipment 0.5 1.2 2.3 Guaranteed purchase obligations expenditures ( 3.1 ) ( 0.4 ) ( 1.9 ) Expenditures for acquisitions, net of cash acquired ( 45.6 ) ( 86.7 ) ( 63.4 ) Net cash used in investing activities ( 122.8 ) ( 162.6 ) ( 113.4 ) FINANCING ACTIVITIES Expenditures for debt issuance costs — — ( 1.7 ) Extinguishment of long-term debt — — ( 153.1 ) Proceeds from line of credit and long-term borrowings 379.6 413.2 633.2 Principal payments on line of credit, long-term debt, and finance lease obligations ( 288.3 ) ( 298.3 ) ( 386.2 ) Proceeds from non-manufacturer floor plan payable 188.4 149.9 105.3 Payments on non-manufacturer floor plan payable ( 179.7 ) ( 121.9 ) ( 110.1 ) Preferred stock dividends paid ( 3.0 ) ( 3.0 ) ( 2.6 ) Common stock dividends declared and paid ( 7.6 ) ( 3.7 ) — Other financing activities ( 2.1 ) 0.7 ( 1.0 ) Net cash provided by financing activities 87.3 136.9 83.8 Effect of exchange rate changes on cash — 0.1 — NET CHANGE IN CASH 28.3 0.4 1.1 Cash, Beginning of year 2.7 2.3 1.2 Cash, End of period $ 31.0 $ 2.7 $ 2.3 Supplemental schedule of noncash investing and financing activities: Noncash asset purchases: Net transfer of assets from inventory to rental fleet within property and equipment $ 180.2 $ 122.9 $ 165.3 Common stock as consideration for business acquisition 6.3 2.7 — Contingent and non-contingent consideration for business acquisitions 2.0 12.7 0.9 Supplemental disclosures of cash flow information Cash paid for interest $ 53.6 $ 28.0 $ 20.2 Cash paid for income taxes $ 5.7 $ 1.0 $ — The accompanying notes are an integral part of these consolidated financial statements. 44 ALTA EQUIPMENT GROUP INC.
Added
AND SUBSIDIARIES Notes to 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.
Added
Unless the context otherwise requires, the use of the terms “the Company”, “we”, “us,” and “our” in these notes to the consolidated financial statements refers to Alta Equipment Group Inc. and its consolidated subsidiaries.
Added
Basis of Presentation The accompanying consolidated financial statements include the consolidated accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions and balances have been eliminated in the preparation of the consolidated financial statements.
Added
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of consolidated financial statements in conformity with U.S.
Added
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 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.
Added
Due to the inherent uncertainty involved with estimates, actual results may differ. Refer to Critical Accounting Policies and Estimates within Item 7 for more information on items in the consolidated financial statements we consider require significant estimation or judgment. Inventory Valuation Inventories are stated at the lower of cost or net realizable value.
Added
Cost is determined by specific identification for equipment and a weighted-average method for parts. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Included in new and used inventory is equipment that is currently on short-term lease to customers.
Added
The Company mainly transfers equipment from inventory into rental fleet based on management’s determination of the highest and best use of the equipment. This inventory is carried at the cost of the equipment less any accumulated depreciation.
Added
Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method, excluding certain categories of our rental equipment, specifically in what we determine to be rent-to-sell equipment categories.
Added
The rent-to-sell categories are depreciated on a percentage of rental revenues realized on the asset, or a unit of activity method of depreciation.
Added
The Company believes that the unit of activity method on these categories of equipment more appropriately matches depreciation expense to revenues versus a straight-line methodology, as asset utilization can vary month to month especially in our northern geographies where seasonality is a factor.
Added
In rent-to-rent product categories, where asset utilization is more stable, like in our Material Handling segment, we use a straight-line depreciation methodology, where estimated useful lives can range from five to ten years. The Company capitalizes expenditures for equipment, leasehold improvements, and rental fleet. Expenditures for repairs, maintenance, and minor renewals are expensed as incurred.
Added
Expenditures for betterments and major renewals that significantly extend the useful life of the asset are capitalized in the period incurred. When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheets, with any resulting gain or loss being reflected in income from operations.
Added
Intangible Assets Intangible assets with a finite life consist of customer and supplier relationships, non-compete agreements, tradenames, and internal use software and are carried at cost less accumulated amortization.
Added
During the fourth quarter of 2021, the Company shortened the remaining useful lives of some tradename intangible assets resulting in accelerated amortization in the fourth quarter of 2021 and 45 thereafter given our rebranding efforts on certain acquisitions.
Added
The estimated useful lives of the finite-lived intangible assets are as follows: Estimated Useful Life Customer and supplier relationships 9 – 10 years Other intangibles 2 – 5 years Evaluation of Goodwill Impairment Goodwill is tested for impairment annually or more frequently if an event or circumstance indicates that an impairment loss may have been incurred.
Added
Application of the goodwill impairment test requires judgment, including: the identification of reporting units; assignment of assets and liabilities to reporting units; assignment of goodwill to reporting units; and determination of the fair value of each reporting unit.
Added
We estimate the fair value of our reporting units (which are our reportable segments) using a discounted cash flow methodology under an income approach, corroborated with the results of a market approach which analyzes the enterprise value (market capitalization plus interest-bearing liabilities) and operating metrics (e.g., earnings before interest, taxes, depreciation and amortization expenses) of companies engaged in the same or similar line of business that we deem comparable to our business and compare those metrics to those of the Company.
Added
We make judgments regarding the comparability of publicly traded companies engaged in similar businesses and base our judgments on factors such as size, growth rates, profitability, business model, and risk. We believe the combination of these valuation approaches yields the most appropriate evidence of fair value.
Added
Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital, and tax rates. We also make certain forecasts about future economic conditions, interest rates, and other market data.
Added
Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods. Changes in assumptions or estimates could materially affect the estimate of the fair value of a reporting unit, and therefore could affect the likelihood and amount of potential impairment.
Added
Financial Accounting Standards Board ("FASB") guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative analysis.
Added
While the Company does not believe a qualitative assessment would have triggered the required quantitative assessment, the Company bypassed the optional qualitative assessments for each reporting unit and performed quantitative assessments at October 1, 2023, 2022 and 2021.
Added
We review goodwill for impairment by comparing the fair value of each of our reporting units' net assets to their respective carrying value. If the carrying value of a reporting unit’s net assets is less than its fair value, we do not recognize an impairment.
Added
If the carrying amount of a reporting unit’s net assets is greater than its fair value, we recognize a goodwill impairment for the amount of the excess of the net assets over the fair value, not to exceed the book value of goodwill.
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Our annual goodwill impairment testing conducted as of October 1, 2023, 2022 and 2021 indicated that all our reporting units had estimated fair values which exceeded their respective carrying amounts. Based on the results of the tests, there was no goodwill impairment.
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Evaluation of Long-lived Asset Impairment (excluding goodwill) Our long-lived assets principally consist of rental equipment, leases, property and equipment, and other intangible assets excluding goodwill. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
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In reviewing for impairment, we first complete a qualitative assessment at the lowest level of identifiable cash flows for our long-lived assets (excluding goodwill).
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If there are indicators of impairment from the qualitative assessment, a quantitative analysis is performed where the carrying value of such assets is compared to the undiscounted future pre-tax cash flows expected from the use of the assets and their eventual disposition.
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If such cash flows are not sufficient to support the asset’s (or asset group’s) recorded value, an impairment loss may be recognized if the estimated fair value of the asset (or asset group) is less than the respective carrying value.
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The determination of future cash flows as well as the estimated fair value of long-lived and intangible assets involves significant estimates and judgment on the part of management. Our estimates and assumptions may prove to be inaccurate due to factors such as changes in economic conditions, expected asset utilization levels, our business activity levels or other changing circumstances.
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In support of our review for indicators of impairment, we perform a review of our long-lived assets at the lowest level of identifiable cash flows to conclude whether indicators of impairment exist associated with our long-lived assets, including our rental and non-rental equipment and right-of-use assets.
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Based on our most recently completed qualitative assessment in the fourth quarter 2023 , there were no indications of impairment associated with our long-lived assets. 46 Business Combinations We allocate the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values on the acquisition date.
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Management develops estimates based on assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the acquisition date. These estimates are inherently uncertain and are subject to refinement when additional information is obtained during the measurement period.
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As a result, during the purchase price measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.
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We recognize a bargain purchase gain within "Other (expense) income, net", in the Consolidated Statements of Operations if the net fair value of the identifiable assets acquired and the liabilities assumed is in excess of the fair value of the total purchase consideration and any noncontrolling interests.
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Revenue Recognition Revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the business expects to be entitled in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain the benefits from the goods and/or services.

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