Business context and reporting period
Alta Equipment Group Inc.’s Form 10-K covers the fiscal year ended December 31, 2019. For that period, the registrant was principally a special-purpose acquisition company (then B. Riley Principal Merger Corp.), not the operating equipment business: it had no operating revenue or full-time employees. The acquisition of Alta Equipment Holdings closed on February 14, 2020, after year-end, so the 2019 statements do not include Alta’s operating results or the effects of the completed business combination.
Financial results, cash flow and liquidity
- Revenue and margins: No operating revenue was reported; the filing does not present operating-company gross margin data.
- 2019 earnings: Operating costs were $1.935 million and interest income was $2.253 million. Income before tax was $317,853; tax expense was $309,000; net income was $8,853. Reported basic and diluted loss per share was $0.56, reflecting the allocation of trust earnings to shares subject to possible redemption.
- Cash flow: Operating cash used was $455,447. Investing cash used was $143.750 million, principally funds deposited in the trust. Financing cash provided was $144.810 million. Year-end cash was $654,488.
- Assets and liquidity: Total assets were $146.831 million, including $145.999 million of marketable securities held in the trust account. Trust funds were restricted for the business combination or other specified purposes; they were not ordinary operating cash.
- Liabilities and debt: Total liabilities were $1.971 million, including $1.562 million of accounts payable and accrued expenses, $309,000 of income taxes payable and $99,641 payable to related parties. No note payable remained at year-end; the related-party note had been repaid using IPO proceeds.
Changes versus the prior period and subsequent transaction
Compared with 2018, the company moved from pre-IPO formation activity to an IPO and trust-funded SPAC structure. 2018 operating costs were $342 and net loss was $1,142; 2019 operating costs were $1.935 million and net income was $8,853, primarily due to trust interest income. The periods are not comparable as operating-company results. In April 2019, the IPO and private placement generated gross proceeds of $143.75 million and $4.625 million, respectively. After year-end, 1,049,036 shares were redeemed at approximately $10.14 per share; the February 2020 closing included a $25 million forward-purchase investment. The filing also reports a private placement of 3.5 million common shares at closing.
Outlook, risks and unusual items
The filing provides no quantified operating guidance. It describes risks for the acquired equipment business, including construction and industrial cyclicality, customer credit and demand, substantial indebtedness and restrictive credit covenants, competition, supplier concentration, used-equipment residual values, fleet maintenance, acquisitions and integration, labor, regulation, environmental exposure and cybersecurity. The filing says the COVID-19 outbreak could disrupt operations, supply chains and customers and could materially affect 2020 results, but its impact could not then be reliably predicted. The combination also involved related-party arrangements, including the forward-purchase agreement and a $5.031 million business-combination marketing fee paid at closing.
The independent auditor issued an unqualified opinion on the 2019 and 2018 financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2019; the auditor did not attest to internal-control effectiveness.
Investor verification priorities
- Review the post-combination filings for Alta’s actual revenue, profitability, cash flows, debt, liquidity and covenant position; those operating metrics are not included in this 2019 report.
- Reconcile the February 2020 closing capitalization, including redemptions, forward-purchase units, the reported 3.5 million-share private placement and outstanding warrants.
- Assess the acquired business’s debt service capacity, credit-facility restrictions and refinancing needs against cash flow and capital expenditure requirements.
- Check subsequent disclosures on COVID-19 effects, equipment demand, supplier availability, used-equipment values and integration or transaction costs.
- Confirm the treatment and use of trust proceeds and closing proceeds, and review the related-party fees and arrangements.