News Column

ESSEX RENTAL CORP. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

May 8, 2014

The following discussion summarizes the financial position of Essex Rental Corp. and its subsidiaries as of March 31, 2014, and its results of operations for the three months ended March 31, 2014 and should be read in conjunction with (i) the unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the audited consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the year ended December 31, 2013.

As used in this Quarterly Report, references to "the Company" or "Essex" or to "we," "us" or "our" refer to Essex Rental Corp., together with its consolidated subsidiaries, Essex Holdings, LLC, Essex Crane Rental Corp., Essex Finance Corp., Coast Crane Company and Coast Crane Ltd., unless the context otherwise requires.

Business Background



Essex Rental Corp. (formerly Hyde Park Acquisition Corp.) was incorporated in Delaware on August 21, 2006 as a blank check company whose objective was to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business. Our activities from our inception through October 31, 2008 were limited to completing our initial public offering and completing a business combination.

On October 31, 2008, we acquired Essex Crane Rental Corp., which we refer to as Essex Crane, through the acquisition of substantially all of the ownership interests of Essex Crane's parent company, Essex Holdings, LLC, which we refer to as Holdings.

Essex Crane is a leading provider of lattice-boom crawler crane and attachment rental services and possesses one of the largest fleets of such equipment in the United States (U.S.). From October 31, 2008 until November 24, 2010, we conducted substantially all of our operations through Essex Crane.

On November 24, 2010 we acquired substantially all of the assets, and assumed certain liabilities (the "Coast Acquisition") of Coast Crane Company ("Coast Liquidating Co."), a leading provider of specialty lifting solutions and crane rental services on the West Coast of the United States. The assets acquired included all of the outstanding shares of capital stock of Coast Crane Ltd., a British Columbia corporation, through which Coast Liquidating Co. conducted its operations in Canada. References to "Coast Crane" mean Coast Crane Company, a Delaware corporation, formerly known as CC Bidding Corp. ("CCBC"), through which we operate the business and assets acquired in the Coast Acquisition.

We conduct substantially all of our operations through Essex Crane and Coast Crane.

Products and Services; Operating Segments

Our principal products and services, as grouped within the Company's three defined operating segments, are described below.

Equipment Rental Segment We offer crawler cranes and attachments, rough terrain cranes, boom trucks and tower cranes for rent. Most attachments are rented separately and increase either the lifting capacity or the reach capabilities of the base cranes. In addition, we provide ancillary items for a fee that include, but are not limited to, accessory rentals, rental unit delivery charges, fuel charges, and in rare instances, third party contracted operator labor. We rent our large fleet of cranes and attachments and other lifting equipment to a variety of engineering and construction customers under contracts, most of which have rental periods of between four and eighteen months. Rough terrain cranes and boom trucks may be rented as frequently as daily. The contracts typically provide for an agreed upon rental rate and a specified rental period. The revenue from crane and attachment rentals is primarily driven by rental rates (which are typically higher for the more expensive cranes with heavier lifting capacities as compared to less expensive cranes with lower lifting capacities) charged to customers and the fleet utilization rate. Rental revenue is recognized as earned in accordance with the terms of the relevant rental agreement on a pro rata daily basis.

Transportation service revenue is derived from the management of the logistics process by which our rental equipment is transported to and from customers' construction sites, including the contracting of third party trucking for such transportation. Transportation revenue is earned under equipment rental agreements on a gross basis representing both the third-party provider's fee for transportation and our fee for managing these transportation services and they are matched with the associated costs for amounts paid to third party providers. The key drivers of transportation revenue are crane, attachment and other lifting equipment

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utilization rates and average contract lengths. Shorter average contract durations and high utilization rates generally result in higher requirements for transportation of equipment and resulting revenue. The distance that equipment has to move between different jobsites and the type of equipment being moved (number of truckloads) are also major drivers of transportation revenue and associated costs. Transportation revenue is recognized upon completion of the transportation of equipment.

In the ordinary course of business, we sell used rental cranes and attachments and other rental lifting equipment to optimize the combination of crane models and lifting capacities available in our rental fleet to match perceived market demands and opportunities. On average, we have historically achieved sale prices for equipment in excess of the appraised value. This is due to the long useful life of the crane and attachment fleet, the conditions prevailing in the secondary market and the high content of engineered high-strength steel included in these fleet assets. Used rental equipment sales are recognized at the time ownership transfers, which is generally based on delivery and/or inspection and acceptance of the equipment in accordance with the terms of the corresponding agreement. The rate at which we replace used equipment with new equipment depends on a number of factors, including changing general economic conditions, growth opportunities and the need to adjust fleet mix to meet customer requirements and demand.

Equipment Distribution Segment We offer a variety of construction equipment products for retail sales including crawler cranes, tower cranes, boom trucks, all-terrain cranes, rough terrain cranes and other lifting equipment used in the construction industry. The revenue from retail equipment sales is primarily driven by the level of construction activity in a particular geographic region. Equipment sales revenue is recognized at the time ownership transfers, which is generally based on delivery and/or inspection and acceptance of the equipment in accordance with the terms of the corresponding agreement. Our equipment distribution operations are conducted through our Coast Crane subsidiary.

Parts and Service Segment We are a parts distributor for various lifting equipment manufacturers and routinely sell parts to our customers in the construction industry. While crawler cranes or attachments, tower cranes, rough terrain cranes, boom trucks or other equipment are on rent, much of the repair and maintenance work is paid for by the customer. We perform a portion of the repair and maintenance work and recognize revenues for such services to the extent they are the customer's responsibility. This category of revenues also includes providing certain services while erecting the equipment during initial assembly or disassembly of the equipment at the end of the rental. We also provide repair and maintenance services for customers that own their own equipment and request our services at one of our service center locations. Our target customers for these ancillary services are our current rental customers, customers that own their own equipment and those who purchase new and used equipment from us. Key drivers for repair and maintenance revenue are the general construction activity in a given geographic region and our skilled mechanics. Repair and maintenance revenue is recognized as such services are performed. Parts revenue is recognized at the time of sale.

In summary, for the three months ended March 31, 2014, 71.8% of total revenues were derived from our equipment rental segment, 6.2% from our equipment distribution segment and 22.0% from our parts and service segment.

Utilization Measurement

We measure utilization using the method referred to as the "days" method. Management believes that this method, while it may reflect lower utilization rates than other methods used in the industry, is the most accurate method for measuring equipment utilization and correlates most closely with rental revenue. Under this method, a real time report is generated from the ERP system for each piece of equipment on rent in a period. The report includes the number of days each piece of equipment was on rent on a particular lease and the base monthly rental rate (excluding any overtime revenues). The total number of days on rent of all pieces of rental equipment provides the numerator for determining utilization. The denominator is all rental equipment assets owned times the number of days in the month. The "days" method is the utilization measurement that we currently use, and we anticipate that the "days" method will be the primary basis for future disclosure of utilization rates for our cranes and other construction equipment offered for rent.

The following table provides a summary of utilization rates calculated using the "days" method for the three months ended March 31, 2014 and 2013 for the equipment types owned during those periods:

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Three Months Ended March 31, 2014 2013 Crawler Cranes 40.9 % 43.9 % Rough Terrain Cranes 58.2 % 58.4 % Boom Trucks 46.1 % 43.4 % Self-Erecting Tower Cranes 44.1 % 46.7 % City & Other Tower Cranes 39.1 % 58.4 % Fleet Overview



As of March 31, 2014 and December 31, 2013, the total orderly liquidation value of the rental equipment fleet was approximately $344.4 million and $345.6 million, respectively.

The Company remains focused on reshaping our asset portfolio and repositioning our fleet through the sale of rental equipment assets, which management believes will improve utilization and increase the return on invested capital. The Company intends to use the proceeds from the sale of rental equipment assets to rebalance the Company's rental fleet mix and reduce debt.

Current Environment

Management believes that, in the long-term, Essex Crane's strong niche market position and improvements in the Company's fleet through investment in new cranes and the Coast Acquisition will provide opportunity for future growth. Management bases such belief on the assumption that, in the long-term, there will be improvements in our customers' ability to obtain financing, including credit for infrastructure projects. We cannot however be certain that our customers' access to financing for infrastructure projects, including credit, will improve.

Adjusted EBITDA to Net Income Reconciliation

Adjusted EBITDA represents the sum of net income, tax benefit, foreign currency exchange gains and losses, interest expense, other income, depreciation and amortization. Adjusted EBITDA is used internally when evaluating our operating performance and, we believe, allows investors to make a more meaningful comparison between our core business operating results over different periods of time, as well as with those of other similar companies. Management believes that Adjusted EBITDA, when viewed with the Company's results under GAAP and the accompanying reconciliation, provides useful information about operating performance and period-over-period growth, and provides additional information that is useful for evaluating the operating performance of our core business without regard to potential distortions. However, Adjusted EBITDA is not a measure of financial performance under GAAP and, accordingly, should not be considered as an alternative to net income (loss) as an indicator of operating performance.

The following table provides a summary of Adjusted EBITDA for the three months ended March 31, 2014 and 2013 (amounts in thousands):

Three Months Ended March 31, 2014 2013 Net loss $ (3,169 )$ (2,162 ) Benefit for income taxes (1,939 ) (1,106 ) Foreign currency exchange (gains) losses 152 116 Interest expense 2,972 2,515 Other income (11 ) (5 ) Loss from operations (1,995 ) (642 ) Depreciation 4,604 4,671 Other depreciation and amortization 258 284 Adjusted EBITDA $ 2,867$ 4,313 22



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Results of Operations

Three months ended March 31, 2014 compared to the three months ended March 31, 2013

The Company had a net loss of $3.2 million for the three months ended March 31, 2014. Total revenue, cost of revenues and gross profit were $21.1 million, $16.9 million and $4.2 million, respectively, for the three months ended March 31, 2014. Total selling, general, administrative and other expenses of $6.2 million was composed primarily of salaries, payroll taxes benefits, sales and marketing, insurance, professional fees, rent, travel, depreciation and amortization expenses. Interest expense related to borrowings under our revolving credit facilities and other debt obligations was $3.0 million for the three months ended March 31, 2014. The Company had an income tax benefit of $1.9 million for the three months ended March 31, 2014 related to loss before income taxes of $5.1 million. Adjusted EBITDA, which includes the impact of $0.1 million of non-cash stock compensation, was $2.9 million for the three months ended March 31, 2014.

The Company had a net loss of $2.2 million for the three months ended March 31, 2013. Total revenue, cost of revenues and gross profit were $25.1 million, $19.3 million and $5.7 million, respectively, for the three months ended March 31, 2013. Total selling, general, administrative and other expenses of $6.4 million was composed primarily of salaries, payroll taxes benefits, sales and marketing, insurance, professional fees, rent, travel, depreciation and amortization expenses. Interest expense related to borrowings under our revolving credit facilities and other debt obligations was $2.5 million for the three months ended March 31, 2013. The Company had an income tax benefit of $1.1 million for the three months ended March 31, 2013 related to loss before income taxes of $3.3 million. Adjusted EBITDA, which includes the impact of $0.1 million of non-cash stock compensation expense, was $4.3 million for the three months ended March 31, 2013.

Revenues

Revenues for the three months ended March 31, 2014 were $21.1 million, a 15.9% decrease compared to revenues of $25.1 million for the three months ended March 31, 2013. The following table provides a summary of the Company's revenues by operating segment (amounts in thousands):

Three Months Ended March 31, Dollar Percentage 2014 2013 Change Change Segment revenues Equipment rentals $ 15,136$ 16,445$ (1,309 ) (8.0 )% Equipment distribution 1,301 3,710 (2,409 ) (64.9 )% Parts and service 4,649 4,910 (261 ) (5.3 )% Total revenues $ 21,086$ 25,065$ (3,979 ) (15.9 )% Equipment Rentals



Equipment rental segment revenues, which represents 71.8% of total revenues, was $15.1 million for the three months ended March 31, 2014, an 8.0% decrease from $16.4 million for the three months ended March 31, 2013. The equipment rental segment includes rental, transportation and used rental equipment sales.

Equipment rentals revenue, which represented 52.4% of total revenues, was $11.0 million for the three months ended March 31, 2014, a 3.6% decrease from $11.5 million for the three months ended March 31, 2013. The two key drivers of equipment rental revenues are utilization and average rental rates.

The slight decrease in equipment rentals revenue is primarily related to a decline in utilization and rental revenue generated from the traditional crawler cranes, and the city and other tower crane fleet. Ancillary revenues for the three months ended March 31, 2013 were higher than usual due to third party operator revenues that were part of a project utilizing our elevator lifts within that period. While there was a decrease in hydraulic crawler crane utilization, it was largely offset by an increase in average rental rates. The overall increase in average rental rates for the hydraulic crawler cranes is primarily attributed to the mix of cranes on rent within the group, although most subclasses within the hydraulic crawler crane fleet have experienced increases in average rental rates when compared to the three months ended March 31, 2013. The decreases in revenue related to the decreases in utilization previously mentioned were partially offset by an increase in rental revenue generated from hydraulic crawler crane attachments, which were utilized throughout the period for power and petrochemical projects in the Midwest and Gulf Coast regions.

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There was an increase in average crawler crane rental rate of 3.8% to $17,622 (per crane per rental month) for the three months ended March 31, 2014 from $16,975 for the three months ended March 31, 2013. This increase in the overall average rental rate, which includes both traditional and hydraulic crawler cranes, is primarily the result of the mix of cranes on rent, with hydraulic crawler cranes contributing a larger portion of overall crawler crane revenue than they did in the three months ended March 31, 2013. While average rental rates have increased for most subclasses within the hydraulic crawler crane fleet when compared to the three months ended March 31, 2013, management does not expect a significant increase in average rental rates on an individual group basis until utilization rates recover significantly.

Utilization for rough terrain cranes for the three months ended March 31, 2014 and 2013 was 58.2% and 58.4%, respectively. Rough terrain cranes benefit from the broad array of markets that they can serve. The slight decline in utilization was driven by a decrease in demand from the power end market. Boom truck utilization increased to 46.1% for the three months ended March 31, 2014 compared to 43.4% for the three months ended March 31, 2013. Strengthening demand in the general building, petrochemical and transportation end markets was the primary factor for increased boom truck utilization. Tower crane utilization was 44.1% and 39.1% for the self-erecting and city & other tower cranes, respectively, for the three months ended March 31, 2014 as compared to 46.7% and 58.4% for the self-erecting and city & other tower cranes, respectively, for the three months ended March 31, 2013. Our tower cranes are primarily impacted by the general building end market, and their utilization levels will reflect the strength of that end market.

Management believes that the construction industry is gradually recovering from historic recession levels and that there is still a large opportunity for growth to match prior peak levels. The decline in utilization for certain classes compared to the prior year is primarily attributed to the lingering result of the larger than average amount of rental ends over the prior two quarters. Within the first quarter of 2014, management has identified further indicators of an improving economic environment, including, but not limited to, sequential improvements in utilization on rough terrain cranes and city & other tower cranes, along with increased order intake and quoting activity on the crawler crane fleet as compared to activity from the prior year.

Transportation revenue, which represents 8.4% of total revenues, was $1.8 million for the three months ended March 31, 2014, a 48.6% increase from $1.2 million for the three months ended March 31, 2013. The increase in transportation revenue is directly attributable to the number of equipment moves for our higher lifting capacity rental equipment. Transportation revenues were positively impacted by the large hydraulic crawler crane attachment rentals that were shipped within the quarter.

Used rental equipment sales revenue was $2.3 million for the three months ended March 31, 2014; a $1.5 million or 39.0% decrease compared to the three months ended March 31, 2013. Included in total used rental equipment revenues are revenues related to the sale of aerial work platforms of $0.4 million for the three months ended March 31, 2013. The decrease in total used rental equipment sales revenue is primarily attributable to the sale of aerial work platforms as part of a strategic decision to eliminate this equipment class from our rental fleet during the three months ended March 31, 2013. During the three months ended March 31, 2014, the Company sold eight pieces of used rental equipment. During the three months ended March 31, 2013, the Company sold eighty-six pieces of rental equipment.

Equipment Distribution

Equipment distribution segment revenue, which represents 6.2% of total revenue, was $1.3 million for the three months ended March 31, 2014, a 64.9% decrease from $3.7 million for the three months ended March 31, 2013. The decrease in equipment distribution segment revenue is primarily attributable to the size of sales transactions as compared to the prior year. During the three months ended March 31, 2013, the Company had a large sales transaction generate sales proceeds of approximately $2.8 million.

Parts and Service

Parts and service segment revenue, which represents 22.0% of total revenue, was $4.6 million for the three months ended March 31, 2014, a 5.3% decrease from $4.9 million for the three months ended March 31, 2013. The decrease is primarily attributable to a decrease in repair and maintenance work performed on equipment currently on lease.

Gross Profit

Gross Profit for the three months ended March 31, 2014 was $4.2 million, a 26.9% decrease from gross profit of $5.7 million for the three months ended March 31, 2013. Gross profit margin was 19.8% for the three months ended March 31, 2014 compared

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to 22.8% for the three months ended March 31, 2013. The following table provides a summary of the Company's gross profit by operating segment (amounts in thousands): Three Months Ended March 31, Dollar Percentage 2014 2013 Change Change Segment gross profit (loss) Equipment rentals $ 2,865 $ 4,018$ (1,153 ) (28.7 )% Equipment distribution 10 409 (399 ) (97.6 )% Parts and service 1,307 1,296 11 0.8 % Total gross profit $ 4,182 $ 5,723$ (1,541 ) (26.9 )%



Equipment rentals segment gross profit of $2.9 million for the three months ended March 31, 2014 decreased $1.2 million or 28.7% as compared to the three months ended March 31, 2013. Within the equipment rentals segment, certain revenue streams have inherently higher margins. The gross margin achieved from the revenues provided by equipment rentals is typically higher than those achieved by gain on sale of used rental equipment and transportation. Furthermore, due to the operating leverage of our business model, the margin from equipment rentals improves as the revenue from this line of business increases. Gain on the sale of used rental equipment was $0.4 million for the three months ended March 31, 2014, a 66.6% decrease from $1.2 million for the three months ended March 31, 2013. The decrease in the gain on the sale of used rental equipment was directly attributable to a decrease in the number of rental assets sold during the three months ended March 31, 2014.

Equipment distribution segment gross profit of approximately $10,000 (0.8% margin) for the three months ended March 31, 2014 decreased $0.4 million, or 97.6%, from $0.4 million (11.0% margin) for the three months ended March 31, 2013. The decreased gross profit and margin are functions of lower profit margins on individual sale transactions and lower sales volume during the three months ended March 31, 2014. During the three months ended March 31, 2013, the Company had a large sales transaction with a gross profit of $0.4 million.

Parts and service segment gross profit of $1.3 million (28.1% margin) for the three months ended March 31, 2014 increased approximately $11,000 or 0.8% from $1.3 million (26.4% margin) for the three months ended March 31, 2013. The parts and service segment gross profit decrease was driven by lower repair and maintenance work performed on equipment currently on lease.

Total selling, general, administrative and other expenses for the three months ended March 31, 2014 and 2013 were $6.2 million and $6.4 million, respectively. The decrease in selling, general, administrative and other expenses was primarily due to decreases in bad debt expense of $0.1 million, professional, and consulting and legal expense of $0.1 million. Selling, general and administrative expenses include, legal fees, professional fees, bad debt expense, employee benefits, insurance and selling and marketing expenses. Selling, general and administrative and other expenses include $0.1 million and $0.1 million of non-cash stock based compensation expense for the three months ended March 31, 2014 and 2013, respectively.

Interest expense increased 18.2% to $3.0 million for the three months ended March 31, 2014 from $2.5 million for the three months ended March 31, 2013. The increase in interest expense is related primarily to a an increase in interest rates as a result of the Essex Crane Revolving Credit Facility amendment entered into at the end of March 2013.

Income tax benefit was $1.9 million for the three months ended March 31, 2014 compared to a $1.1 million for the three months ended March 31, 2013. The increase in income tax benefit is due to an increase in the pre-tax loss. The effective tax rates were 38.0% and 33.8% for the three months ended March 31, 2014 and 2013, respectively. The effective tax rate increased from the prior year due to an increase in state tax rates resulting primarily from changes in apportionment.

Essex had 241 full-time employees at March 31, 2014 compared to 253 full-time employees at March 31, 2013. Liquidity and Capital Resources

Cash flow from operating activities. The Company's cash used in operating activities for the three months ended March 31, 2014 was $0.7 million. This was primarily the result of net loss of $3.2 million, which, when adjusted for non-cash expense items, such as depreciation and amortization, gains on the sale of rental equipment, deferred income taxes and stock-based compensation expense, resulted in a use of cash of approximately $0.1 million. The negative cash flows from operating activities were increased by a total change in operating assets and liabilities of $0.6 million, which was comprised of a $0.2 million increase in accounts

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receivable, a $0.1 million increase in prepaid expenses, a $0.7 million increase in retail equipment, a $0.3 million increase in spare parts inventory and a $0.1 million decrease in customer deposits. These uses of cash were partially offset by a $0.3 million decrease in other receivables a $0.2 million increase in accounts payable and accrued expenses, and a $0.2 million increase in unearned rental revenue.

The Company's cash used by operating activities for the three months ended March 31, 2013 was $1.9 million. This was primarily the result of net loss of $2.2 million, which, when adjusted for non-cash expense items, such as depreciation and amortization, including amortization of the promissory note discount, gains on the sale of rental equipment, deferred income taxes and stock-based compensation expense, provided cash flows of $1.5 million. The cash flows from operating activities were decreased by a total change in operating assets and liabilities of $3.3 million, which was comprised of a a $2.0 million increase in accounts receivable, $0.2 million increase in prepaid expenses and other assets and a $3.4 million decrease in accounts payable and accrued expenses. These uses of cash were partially offset by a $0.2 million decrease in other receivables, a $1.2 million decrease in retail equipment inventory, a $0.1 million decrease in spare parts inventory, a $0.3 million increase in unearned rental revenue and a $0.4 million increase in customer deposits.

Cash flow from investing activities. The Company's cash provided by investing activities for the three months ended March 31, 2014 was $2.5 million. This was primarily the result of proceeds from the sale of rental equipment of $2.3 million and a decrease in accounts receivable from rental equipment sales of $0.8 million. These sources of cash were partially offset by purchases of rental equipment of $0.6 million and purchases of property and equipment of $0.1million.

The Company's cash provided by investing activities for the three months ended March 31, 2013 was $3.0 million. This was primarily the result of proceeds from the sale of rental equipment of $3.8 million. This source of cash was partially offset by purchases of rental equipment of $0.1 million, purchases of property and equipment of $0.2 million and and increase in accounts receivable from rental equipment sales of $0.5 million.

Cash flow from financing activities. The Company's cash used in financing activities for the three months ended March 31, 2014 was $2.2 million. This was primarily the result of net payments made on the revolving credit facilities of $1.5 million, payments on the term loan of $0.5 million, payments on purchase money security interest debt of $0.2 million and payments for loan acquisition costs related to the amendment of the Coast Crane Revolving Credit Facility of approximately $37,000. Gross borrowings and payments on the revolving credit facilities were $21.4 million and $22.8 million, respectively, for the period. Gross borrowings and payments on the purchase money security interest debt for the period were $0.5 million and $0.2 million, respectively.

The Company's cash used in financing activities for the three months ended March 31, 2013 was $6.5 million. This was primarily the result of payments made for loan acquisition costs of $6.6 million as a result of refinancing the Essex Crane Revolving Credit Facility and the Coast Crane Revolving Credit Facility. This financing activity use of cash was increased by the payments on purchase money security interest debt of $0.4 million and employer repurchase of shares to satisfy minimum tax withholdings of $0.1 million and was partially offset by net borrowings on the revolving credit facilities and term loan of $0.6 million. Gross borrowings and payments on the revolving credit facilities were $24.5 million and $63.9 million respectively, for the period. Gross proceeds from the term loan were $40.0 million. Gross borrowings and payments on the purchase money security interest debt for the period were $0.5 million and $0.4 million, respectively.

Cash Requirements Related to Operations

Our principal sources of liquidity have been from cash provided by operating activities and the sales of used rental fleet equipment, proceeds from the issuance of debt, and borrowings available under our revolving credit facilities. Our principal uses of cash have been to fund operating activities and working capital and purchases of rental fleet equipment and property and equipment. We anticipate that the above described uses will be the principal demands on our cash in the future.

The amount of our future capital expenditures will depend on a number of factors including general economic conditions, growth prospects and the Company's overall strategy. Proceeds from the sale of used rental equipment of $2.3 million and $3.8 million, respectively, during the three months ended March 31, 2014 and 2013, were used primarily to pay down our outstanding debt balance or to reinvest in new rental equipment assets. In response to changing economic conditions, we believe we have the flexibility to increase or decrease our capital expenditures to match our actual performance and needs. As of March 31, 2014, we had approximately $26.9 million of available borrowings under our revolving credit facilities, net of outstanding letters of credit and other reserves, and additionally, approximately $1.0 million of cash on hand; providing the company with $27.9 million of potential liquidity.

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To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond our control. As of March 31, 2014, Essex Crane had a revolving credit facility which provided for an aggregate borrowing capacity of $165.0 million, of which $147.4 million was outstanding, and Coast Crane had a revolving credit facility which provided for an aggregate borrowing capacity of $74.9 million, of which $54.7 million was outstanding. Each facility is secured by a first priority lien on all of the applicable borrower's assets and, in the event of default; the lenders generally would be entitled to seize the collateral. We also have approximately $6.9 million of other term debt, $3.7 million of which is unsecured while the remaining amount is secured by specific equipment. The Essex Crane Revolving Credit Facility and the Coast Crane Credit Facility mature in October 2016 and March 2017, respectively, and the unsecured promissory notes mature in October 2016. No assurance can be given that we will be able to refinance our credit facilities or other debt obligations prior to their respective maturity dates upon terms acceptable to us.

The maximum commitment under the Essex Crane Revolving Credit Facility may not exceed $150.0 million and $130.0 million beginning on March 31, 2015 and February 28, 2016, respectively, and Essex Crane is required to have availability in excess of 10% of the outstanding commitment. At March 31, 2014, Essex Crane had approximately $1.1 million of liquidity available under the Essex Crane Revolving Credit Facility to fund operations. The Company intends to use the proceeds from crawler crane assets sales and cash flows generated by operations to meet the commitment reductions, however, it is likely that other financing sources will be required to fully meet the March 31, 2015 and February 28, 2016 commitment reductions.

We cannot provide absolute assurance that our future cash flow from operating activities will be sufficient to meet our long-term obligations and commitments. If we are unable to generate sufficient cash flow from operating activities in the future to service our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. Given current economic and market conditions, including the significant disruptions in the global capital markets, we cannot assure investors that any of these actions could be affected on a timely basis or on satisfactory terms or at all, or that these actions would enable us to continue to satisfy our capital requirements. In addition, our existing or future debt agreements, including the indenture governing the revolving credit facilities, contain certain restrictive covenants, which may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the accelerations of all of our debt.

On April 29, 2014, Coast Crane entered into a Second Amendment (the "Second Amendment") to the Second Amended and Restated Credit Agreement. The purpose of the Second Amendment is to adjust the minimum fixed charge coverage ratio requirement to 0.88 to 1.00, 1.00 to 1.00 and 1.10 to 1.00 from 1.20 to 1.00, for the trailing twelve month periods ended April 30, 2014, May 31, 2014 and June 30, 2014, respectively. The minimum required fixed charge coverage ratio for the trailing twelve month periods ending July 31, 2014 and thereafter will remain 1.20 to 1.00. In addition, the Second Amendment waives any event of default arising from Coast Crane's breach of the minimum 1.20 to 1.00 fixed charge coverage ratio requirement for the trailing twelve month period ended March 31, 2014, so long as the fixed charge coverage ratio for such period is at least equal to 1.00 to 1.00. Further, under the amendment, Coast Crane is required to achieve a minimum trailing twelve month EBITDA threshold as of the last day of the month of $7.7 million for March 2014 through August 2014; $7.9 million for September 2014 through November 2014; $8.0 million for December 2014 through February 2015; $8.2 million for March 2015 through May 2015; and $8.3 million for June, 2015 and thereafter. All other terms of the February 21, 2014 amendment and restatement remained in effect following such amendment. Seasonality

Although we believe our business traditionally is not materially impacted by seasonality, the demand for our rental equipment tends to be lower in the winter months. The level of equipment rental activities are directly related to infrastructure, commercial, residential and industrial construction and maintenance activities. Therefore, equipment rental performance will be correlated to the levels of current construction activities. The severity of weather conditions can have a temporary impact on the level of construction activities.

Equipment sales cycles are also subject to some seasonality with the peak selling period during the spring season and extending through the summer. Parts and service activities are traditionally affected to a lesser extent by changes in demand caused by seasonality.

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Contractual Obligations

During the three and three months ended March 31, 2014, there were no material changes outside the ordinary course of our business in our long-term debt, capital lease or purchase obligations or in other long-term liabilities disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013. Off-Balance Sheet Arrangements

During the three and three months ended March 31, 2014, there were no material changes in the off-balance sheet arrangements disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

Critical Accounting Policies Item 7, included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2013, presents the accounting policies and related estimates that we believe are the most critical to understanding our consolidated financial statements, financial condition, and results of operations and cash flows, and which require complex management judgment and assumptions, or involve uncertainties. These include, among other things, revenue recognition, the propriety of our estimated useful life of rental equipment and property and equipment, the adequacy of the allowance for doubtful accounts, income taxes, the potential impairment of long-lived assets including intangible assets and derivative financial instruments.

Information regarding our other significant accounting policies is included in Note 2 to our consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2013. Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our earnings are affected by changes in interest rates due to the fact that interest on our revolving credit facilities is calculated based upon either LIBOR or Prime Rate plus an applicable margin as of March 31, 2014. The weighted average interest rate in effect on all of the Company's borrowings at March 31, 2014 was 4.53%. A 1.0% increase in the effective interest rate on our total outstanding borrowings (including our short-term debt obligations) at March 31, 2014 would increase our interest expense by approximately $1.6 million on an annualized basis. Item 4. Controls and Procedures

Management's Quarterly Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

Our management, with participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(f) promulgated under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of March 31, 2014, our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required financial disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that occurred during the three months ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Source: Edgar Glimpses