10-Q 1 d10q.txt FORM 10-Q -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-Q (Mark One) [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: ---------------- ANTHONY CRANE RENTAL, L.P. (Exact Name of Registrant as Specified in Its Charter) Doing Business as Maxim Crane Works Pennsylvania 25-1739175 (I.R.S. Employer Identification No.) (State or other jurisdictionof incorporation or organization) 800 Waterfront Drive Pittsburgh, PA 15222 (Address of Principal Executive Offices) (412) 320-4900 Registrants Telephone Number, Including Area Code: ---------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Aggregate market value of voting partnership interests held by non- affiliates as of August 8, 2001: not applicable. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-Q. [X] Number of common partnership interests outstanding as of August 8, 2001: 100 DOCUMENTS INCORPORATED BY REFERENCE: None -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ANTHONY CRANE RENTAL, L.P. QUARTERLY REPORT ON FORM 10-Q For the Quarterly Period Ended June 30, 2001 TABLE OF CONTENTS Part I ITEM 1 Index to Condensed Consolidated Financial Statements............. 3 Management's Discussion and Analysis of Financial Condition and ITEM 2 Results of Operations............................................ 16 Part II ITEM 1 Legal Proceedings................................................ 20 ITEM 2 Changes in Securities............................................ * ITEM 3 Defaults Upon Senior Securities.................................. * ITEM 4 Submission of Matters to a Vote of Security Holders.............. * ITEM 5 Other Information................................................ * ITEM 6 Index to Exhibits and Reports on Form 8-K........................ 20 Signatures....................................................... 21

-------- *Item not applicable to the Registrant for this filing on Form 10-Q. Unless otherwise indicated, the terms "Anthony Crane Rental", "ACR", "Maxim" and "the Company" refer collectively to Anthony Crane Rental, L.P., and its subsidiaries. Certain statements contained in this report are forward-looking in nature. These statements are generally identified by the inclusion of phrases such as "the Company expects", "the Company anticipates", "the Company believes", "the Company estimates", and other phrases of similar meaning. Whether such statements ultimately prove to be accurate depends upon a variety of factors that may affect the business and operations of the Company. 2 PART I ITEM 1. INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 ANTHONY CRANE RENTAL, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements. 4 ANTHONY CRANE RENTAL, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements. 5 ANTHONY CRANE RENTAL, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements. 6 ANTHONY CRANE RENTAL, L.P. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

The accompanying notes are an integral part of the condensed consolidated financial statements. 7 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands) 1. Description of Business Anthony Crane Rental, L.P. (the "Partnership") and its subsidiaries, doing business as Maxim Crane Works ("Maxim"), are engaged in the rental of cranes and other heavy equipment primarily for industrial maintenance and construction to a variety of companies in the petrochemical, paper, steel, power generation, telecommunication, mining and multiple other industries. The Partnership provides twenty-four hour service, seven days a week to customers principally in the United States. The Partnership also sells new and used equipment to commercial construction, industrial and residential users. 2. Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of the Partnership and all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of the Partnership have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. During interim periods, the Partnership follows the accounting policies set forth in its annual report on Form 10-K filed with the Securities and Exchange Commission. Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the Form 10-K when reviewing interim financial results. In the opinion of management, all adjustments which are of a normal and recurring nature necessary for a fair presentation of the results of operations of these interim periods have been included. The net loss for the three and six month periods ended June 30, 2001, is not necessarily indicative of the results to be expected for the full fiscal year. The management discussion and analysis, which follows these notes, contains additional information on the results of operations and financial position of the Company. Those comments should be read in conjunction with these financial statements. 3. Cash Flow Statement Supplemental cash flow information with respect to acquisitions was as follows for the six-months ended June 30: Details of Acquisitions:

8 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (In thousands) 4. Long-Term Debt Long-term debt consists of the following:

-------- (A) The Senior Notes of $155 million were issued in connection with the Company's recapitalization on July 22, 1998, and will mature on August 1, 2008. Interest on the Senior Notes accrues at the rate of 10 3/8% per annum from the issue date and is payable semi-annually. The Senior Notes are not redeemable prior to August 1, 2003. Thereafter, the Senior Notes may be redeemed at any time at the option of the Company at premium percentages ranging between approximately 105% and 102% (based on the year of redemption) if redeemed after August 1, 2003, but before August 1, 2006. Subsequent to August 1, 2006, the Senior Notes may be redeemed at no premium to the Company. Notwithstanding the foregoing, at any time prior to August 1, 2001, the Company could have redeemed a total of up to 35% of the aggregate principal amount of the Senior Notes originally issued under the Senior Note Indenture at a redemption price of approximately 110 3/8% of the principal if that redemption is paid for with the proceeds of an equity offering. No such redemption has occurred. The Senior Note Indenture contains certain restrictive covenants that limit, among other things, the ability of the Company to make distributions, incur additional indebtedness, consolidate or sell substantially all of its assets, and enter into transactions with related parties. (B) The Senior Credit Facilities consist of a $425.0 million six-year non- amortizing Revolving Credit Facility, a $50.0 million eight-year non- amortizing Term Loan and a $250.0 million seven-year First Priority Term Loan. The Revolving Credit Facility is available on a revolving basis subject to a borrowing base during the period commencing on the date of the Closing of the recapitalization transaction (July 22, 1998) and ending on the date that is six years after the date of the Closing. At the Company's option, loans made under the Revolving Credit Facility bear interest at either (i) the Base Rate (defined as the highest of the rate of interest announced publicly by Fleet National Bank from time to time as its prime rate or the Federal funds effective rate from time to time plus 0.50%) plus a margin of 1.5%, subject to adjustment based on a leverage test, or (ii) the reserve-adjusted London Interbank Offered Rate ("LIBOR") plus a margin of 2.5%, subject to adjustment based on a leverage test. The Term Loan bears interest, at the Company's option, at either (i) the Base Rate plus a margin of 2.50%, or (ii) the reserve-adjusted LIBOR Rate plus a margin of 3.50%. The First Priority Term Loan bears interest, at the Company's option, at either (i) the Base Rate plus a margin of 2.25%, subject to adjustment based on a leverage test, or (ii) the reserve-adjusted LIBOR rate plus a margin of 3.25%, subject to adjustment based on a leverage test. 9 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (In thousands) 4. Long-Term Debt (continued) Revolving loans may be borrowed, repaid and reborrowed from time to time until six years after the closing of the Senior Credit Facilities. The Term Loan may be repaid at any time but is subject to certain call protections and must be repaid in full eight years after the closing of the Senior Credit Facilities. The First Priority Term Loans will be amortized equal to 1% of the aggregate principal amount thereof with the unpaid balance thereof payable in full on July 20, 2006. The Revolving Credit Facility and First Priority Term Loans are secured by a first-priority perfected lien, and the Term Loan is secured by a second- priority perfected lien, on all partnership interests of the Company and all property and assets (tangible and intangible) of the Company and each of its material subsidiaries, including, without limitation, all intercompany indebtedness, and all capital stock (or similar equity interests owned by the Company) of each of the Company's direct and indirect material subsidiaries, whenever acquired and wherever located; provided, however, that no more than 65% of the capital stock or similar equity interests of non-U.S. subsidiaries, if any, will be required to be pledged as security in the event that a pledge of a greater percentage would result in increased tax or similar liabilities for the Company and its subsidiaries on a consolidated basis or would violate applicable law. The Senior Credit Facilities provide for mandatory repayments, subject to certain exceptions, of the Revolving Credit Facility and the Term Loan based on certain net asset sales outside the ordinary course of business of the Company and its subsidiaries and the net proceeds of certain debt and equity issuances. Outstanding loans under the Revolving Credit Facility and the Term Loan ( subject to certain call provisions) are voluntarily pre- payable without penalty; provided, however, that LIBOR breakage costs, if any, shall be borne by the Company. The Senior Credit Facilities contains certain restrictive covenants; the most restrictive of which include financial ratios. The obligations of the Company under the Senior Notes and Senior Credit Facilities are guaranteed on a full, unconditional joint and several basis, by all material existing, direct and indirect domestic subsidiaries of the Company and will be guaranteed by all material future, direct and indirect domestic and foreign subsidiaries of the Company. (C) The Equipment Note Payable consists of a promissory note with an interest rate of 8.54% payable in monthly installments through February 2008. These borrowings are collateralized by a security interest in the equipment purchased with the proceeds. The aggregate principal debt maturities of long-term debt for the next five years are as follows: 2001................................................................ $ 1,963 2002................................................................ 2,689 2003................................................................ 2,705 2004................................................................ 286,724 2005 ............................................................... 235,869 Thereafter.......................................................... 205,605 -------- $735,555 ========

10 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (In thousands) 5. Lease Commitments In connection with the acquisitions completed in 2000 and 1999, the Partnership assumed certain obligations related to capital leases. The following is a schedule of future minimum lease payments under the capital lease agreements together with the present value of the net minimum lease payments as of June 30, 2001:

Included in rental equipment is cost and accumulated depreciation for these leased assets of approximately $3,878 and $555, respectively, at June 30, 2001 and $4,266 and $455, respectively, at December 31, 2000. 6. Contingencies The Company is a party to a number of lawsuits and claims arising out of the usual course of business. While the Company cannot predict the outcome of these matters, in the opinion of management upon advice of counsel, any liability resulting thereunder will not have a material adverse effect on the Company's business or financial condition, after giving effect to provisions already recorded. However, there can be no assurance that an adverse outcome in one or more of these matters will not be material to results of operations in any one period. Additionally, certain of these matters are covered by the indemnity from the partners prior to the Company's recapitalization on July 22, 1998. The Company has received a proposed assessment from a state taxing authority in the amount of $2.4 million, including interest and penalties of $0.5 million and $0.2 million, respectively, as a result of a state sales and use tax audit. During the first quarter 2001, the Company recorded a liability of approximately $1.2 million, $0.8 million of which has been capitalized to rental equipment, as management believes the assessment contains certain errors. The liability recorded represents management's best estimate of the ultimate liability. Management is presently reviewing the assessment with the respective state taxing authority. 7. Subsidiary Guarantors All of the Company's subsidiaries are wholly owned and all of the outstanding debt under the Company's Senior Notes and Senior Credit Facility are guaranteed on a full, unconditional and joint and several basis by all of these subsidiaries (the "Guarantor Subsidiaries"). The following summarized financial information presents the financial position for Holdings, the Company and Guarantor Subsidiaries as of June 30, 2001 and December 31, 2000, the results of operations for the three and six month periods ended June 30, 2001 and 2000 and cash flows for the six month periods ended June 30, 2001 and 2000. Separate financial statements of the 11 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (In thousands) 7. Subsidiary Guarantors (continued) Guarantor Subsidiaries have not been presented because management believes they are not material to investors. Effective December 31, 2000, Carlisle Equipment Group, L.P. and Carlisle G.P., L.L.C. (collectively referred to as "Carlisle"), a wholy-owned subsidiary of the Company entered into a Deed of Distribution and Assumption of Liabilities, distributing all of its assets to the Company. Accordingly, Carlisle will no longer be a separate subsidiary of the Company. The following table summarizes the financial position for the Company and its guarantor subsidiaries as of June 30, 2001 and December 31, 2000:

12 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (In thousands) 7. Subsidiary Guarantors (continued) The following table summarizes the results of operations for the Company and its guarantor subsidiaries for the three and six month periods ended June 30, 2001 and 2000.

13 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (In thousands) 7. Subsidiary Guarantors (continued) The following table summarizes the cash flows for the Company and its guarantor subsidiaries for the six months ended June 30, 2001 and 2000.

8. Operating Segment Information The Company identifies and manages its business as two operating segments, equipment rentals and equipment sales. The equipment rentals segment is engaged in the rental of cranes and other heavy equipment primarily for industrial maintenance and construction to a variety of companies in the petrochemical, paper, steel, power generation, telecommunication, mining and multiple other industries, primarily throughout the United States. The equipment sales segment sells new and used equipment to commercial construction, industrial and residential users. The accounting policies of the segments are the same as those of the Company. The Company evaluates the performance of its segments and allocates resources to them based on earnings before interest, taxes, depreciation and amortization (EBITDA), as defined to exclude net gains on sales of used equipment. The Company does not maintain information about assets for its reportable segments. Accordingly, the items specified in Paragraph 28 of FAS 131 are not applicable. 14 ANTHONY CRANE RENTAL, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) (In thousands) 8. Operating Segment Information (continued) The table below presents information about reported segments for the three and six-month periods ended June 30:

9. Subsequent Event On July 2, 2001, the Company acquired certain assets of Head & Engquist, doing business as South Texas Equipment Company. The aggregate purchase price was $4.8 million in cash. The acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired, principally equipment, based on their estimated fair values at the date of acquisition, and a non-compete agreement. There was no goodwill recorded as a result of this acquisition. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended June 30, 2001 Compared to the Three Months Ended June 30, 2000 Equipment Rental Revenues: Revenues from equipment rentals increased $9.7 million, or 10.9%, to $99.0 million for the quarter ended June 30, 2001, as compared to $89.3 million for the same period in the prior year. This increase is primarily the result of incremental revenues generated by the acquisitions completed in the second half of 2000, as well as internal growth from the Company's existing yards. Equipment Sales: Revenues from equipment sales decreased $2.0 million, or 20.2%, to $7.9 million for the quarter ended June 30, 2001, as compared to $9.9 million for the same period in the prior year. This decrease is primarily the result of a decrease in volume of equipment sales under the Company's fleet management program. Total Revenues: Based on the foregoing, total revenues increased $7.7 million, or 7.8%, to $106.9 million for the quarter ended June 30, 2001, as compared to $99.2 million for the quarter ended June 30, 2000. Gross Profit: Gross profit from equipment rentals decreased $3.1 million, or 9.0%, to $31.4 million for the quarter ended June 30, 2001, as compared to $34.5 million for the same period in the prior year. As a percent of rental revenues, gross profit from equipment rentals decreased to 31.7% for the quarter ended June 30, 2001, as compared to 38.7% for the quarter ended June 30, 2000. This decrease in gross profit margins is due primarily to a rental revenue mix change where a significant increase in operated and maintained rentals occurred. Compared to bare rentals, operated and maintained rentals have a higher level of variable labor costs and, accordingly, lower gross margins associated with them. The lower gross profit margin percentage was also impacted to a lesser extent by higher depreciation expense on rental equipment and by increases in lower margin rerentals and excavation revenues. Gross profit from equipment sales decreased $1.2 million, or 80.0%, to $.3 million for the quarter ended June 30, 2001, as compared to $1.5 million for the same period in the prior year. As a percent of equipment sales, gross profit margin decreased from 15.5% for the quarter ended June 30, 2000, to 3.8% for the quarter ended June 30, 2001. This decrease in gross profit reflects lower sales prices generated from equipment sales during the quarter. The decrease in price is due to the age and type of equipment being sold under the Company's fleet management program as well as softer new equipment pricing. Based on the foregoing, gross profit decreased $4.4 million, or 12.2%, to $31.7 million for the quarter ended June 30, 2001, as compared to $36.0 million for the same period in the prior year. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased $1.7 million, or 8.8%, to $20.9 million for the quarter ended June 30, 2001, as compared to $19.2 million for the same period in the prior year. This increase is primarily attributable to an increase in facility and insurance costs for the Company. As a percent of total revenues, selling, general and administrative expenses increased slightly to 19.5% for the quarter ended June 30, 2001, as compared to 19.4% for the same period in the prior year. Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA (as defined to exclude net gains on sales of used equipment) decreased $3.4 million, or 10.6%, to $28.5 million for the quarter ended June 30, 2001, as compared to $31.9 million for the same period in the prior year. EBITDA from equipment rentals (as further defined to exclude gains on the sale of new equipment) decreased $3.3 million, or 10.6%, to $27.9 million for the quarter ended June 30, 2001, as compared to $31.2 million for the same period in the 16 prior year. As a percent of rental revenues, EBITDA from rental operations decreased to 28.2% for the quarter ended June 30, 2001, as compared to 34.1% for the same period in the prior year. This decrease is due to the factors discussed above. Interest Expense: Interest expense decreased $.9 million, or 4.8%, to $17.7 million for the quarter ended June 30, 2001, as compared to $18.6 million for the same period in the prior year. This decrease is primarily attributable to a decrease in interest rates during the period, partially offset by an increase in the outstanding debt levels as a result of acquisitions completed in the second half of 2000 and the Company's continued investment in rental equipment. Net Loss: Net loss increased $3.7 million, or 194.7%, to a net loss of $5.6 million for the quarter ended June 30, 2001, as compared to a net loss of $1.9 million for the same period in the prior year, as a result of the factors discussed above. Six Months Ended June 30, 2001 Compared to the Six Months Ended June 30, 2000 Equipment Rental Revenues: Revenues from equipment rentals increased $28.3 million, or 16.2%, to $203.0 million for the six months ended June 30, 2001, as compared to $174.7 million for the same period in the prior year. This increase is primarily the result of incremental revenues generated by the companies acquired in 2000, as well as internal growth from the Company's existing yards. Equipment Sales: Revenues from equipment sales decreased $4.4 million, or 20.0%, to $17.6 million for the six months ended June 30, 2001, as compared to $22.0 million for the same period in the prior year. This decrease is primarily due to a decrease in sales volume for both new equipment and used equipment sold as part of the Company's fleet management program, as well as overall softer pricing. Total Revenues: Based on the foregoing, total revenues increased $23.9 million, or 12.1%, to $220.6 million for the six months ended June 30, 2001, as compared to $196.7 million for the same period in the prior year. Gross Profit: Gross profit from equipment rentals decreased $0.7 million, or 1.1%, to $64.4 million for the six months ended June 30, 2001, as compared to $65.1 million for the same period in the prior year. As a percent of equipment rental revenues, gross profit from equipment rentals decreased from 37.3% for the six months ended June 30, 2000, to 31.7% for the six months ended June 30, 2001. This decrease in gross profit margins is due primarily to a rental revenue mix change where a significant increase in operated and maintained rentals occurred. Compared to bare rentals, operated and maintained rentals have a higher level of variable labor costs and, accordingly, lower gross margins associated with them. The lower gross profit margin percentage was also impacted to a lesser extent by higher depreciation expense on rental equipment and by increases in lower margin rerentals and excavation revenues. Gross Profit from equipment sales decreased $2.6 million, or 74.3%, to $.9 million for the six months ended June 30, 2001, as compared to $3.5 million for the same period in the prior year. As a percent of equipment sales revenues, gross profit from equipment sales decreased to 5.1% for the six months ended June 30, 2001, as compared to 15.9% for the same period in the prior year. This decrease in gross profit reflects lower sales prices generated from equipment sales during the quarter. The decrease in price is due to the age and type of equipment being sold under the Company's fleet management program as well as softer new equipment pricing. Based on the foregoing, gross profit decreased $3.2 million, or 4.7%, to $65.4 million for the six months ended June 30, 2001, as compared to $68.6 million for the same period in the prior year. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased $3.8 million, or 9.8%, to $42.4 million for the six months ended June 30, 2001, as compared to $38.6 million 17 for the same period in the prior year. This increase is primarily the result of an increase in employee-related costs, facility and insurance costs and amortization expense resulting from the acquisitions completed in 2000, as well as internal growth. As a percent of revenues, selling, general and administrative expenses decreased to 19.2% for the six months ended June 30, 2001, as compared to 19.6% for the same period in the prior year. Earnings Before Interest, Taxes, Depreciation and Amortization: EBITDA ( as defined to exclude net gains on sales of used equipment) decreased $ 1.0 million, or 1.7%, to $57.6 million for the six months ended June 30, 2001, as compared to $58.6 million for the same period in the prior year. EBITDA from equipment rentals (as further defined to exclude gains on the sale of new equipment) increased $0.3 million, or 0.5% to $56.4 million for the six months ended June 30, 2001, as compared to $56.1 million for the same period in the prior year. As a percent of rental revenues, EBITDA from rental operations decreased to 27.8% for the six months ended June 30, 2001, as compared to 32.1% for the same period in the prior year. This decline in EBITDA margin is due to the factors discussed above. Interest Expense: Interest expense increased $.4 million, or 1.1%, to $36.3 million for the six months ended June 30, 2001, as compared to $35.9 million for the same period in the prior year. This increase reflects the higher level of borrowings outstanding attributable to the acquisitions completed in 2000 as well as the Company's continued investment in rental equipment, offset in part by decreasing interest rates. Net Loss: Net loss increased $5.7 million, or 90.5%, to a net loss of $12.0 million for the six months ended June 30, 2001, as compared to a net loss of $6.3 million for the same period in the prior year as a result of the factors discussed above. Liquidity and Capital Resources Net cash provided by operating activities decreased by $8.8 million, or 37.1%, to $14.9 million for the six months ended June 30, 2001, as compared to $23.7 million for the same period in the prior year. This decrease is primarily the result of an increase in the net loss for the period, as well as a decrease in accounts payable during the period. During the six months ended June 30, 2001 and 2000, the Company's principal uses of cash for investing activities was for capital expenditures, including expenditures for rental equipment. Total capital expenditures for these periods were $33.0 million and $42.1 million, respectively. Included in these totals were expenditures for rental equipment totaling $28.9 million and $36.4 million, respectively. These expenditures were made to increase the Company's total investment in the rental fleet and to replace sold used equipment. Proceeds from the disposition of assets totaled $11.2 million and $15.1 million for the six months ended June 30, 2001 and 2000, respectively. In addition, the Company used $20.7 million during the six months ended June 30, 2000 in the purchase of various businesses. Net cash provided by financing activities during the six months ended June 30, 2001 was $2.5 million, a decrease of $27.3 million, or 91.6%, compared to $29.8 million for the six months ended June 30, 2000. The decrease in net cash provided by financing activities was due to a decrease in the net borrowings to fund acquisitions and capital expenditures. The Company has no long-term minimum purchase commitments for rental equipment. In the six months ended June 30, 2001 and 2000, the Company incurred approximately $1.6 million related to a sale/leaseback transaction entered into in December 1996. This transaction will require annual payments of approximately $3.1 million through January 2004. In connection with the Company's recapitalization on July 22, 1998, the Company and Anthony Crane Rental Holdings, L.P. ("Holdings") incurred significant amounts of debt with interest and principal payments on the Discount Debentures, the Senior Notes and under the Senior Credit Facilities representing significant obligations of the Company and Holdings. Holdings' operations are conducted through its subsidiaries and Holdings is, therefore, dependent upon the cash flow of the subsidiaries, including the Company, to meet its debt obligations. The Company's liquidity needs relate to working capital, debt service, capital expenditures and potential acquisitions. 18 The Company intends to fund its working capital, capital expenditures, acquisitions and debt service requirements through cash flows generated from operations and borrowings under the Senior Credit Facilities. The Senior Credit Facilities consist of a $425.0 million, non-amortizing Revolving Credit Facility of which a net amount of $284.0 million was drawn at June 30, 2001, a $50.0 million non-amortizing Term Loan and a $250.0 million First Priority Term Loan. Amounts under the Revolving Credit Facility will be available on a revolving basis during the period commencing on July 22, 1998 (the date of the closing) and ending on the sixth anniversary of the closing. As of June 30, 2001, based on the Company's borrowing base as determined in the Senior Credit Facility, the Company's remaining availability on the revolving facility was $39.7 million. The Senior Credit Facilities, the Senior Notes and the Discount Debentures contain certain covenants that limit, among other things, the ability of the Company and Holdings to: (i) make distributions, redeem partnership interests or make certain other restricted payments or investments other than distributions to pay taxes; (ii) incur additional indebtedness or issue preferred equity interests; (iii) merge, consolidate or sell all or substantially all of its assets; (iv) create liens on assets; and (v) enter into certain transactions with affiliates or related persons. In addition, the Senior Credit Facilities require the Company to maintain specific financial ratios and tests, among other obligations, including a minimum interest coverage ratio. At June 30, 2001, the Company was in full compliance with the financial covenants, including with respect to the minimum interest coverage ratio. Impact of Recently Issued Accounting Standards In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." These standards require that all business combinations be accounted for using the purchase method and that all goodwill not be amortized, but tested periodicaly for impairment and provide guidelines for new disclosure requirements. The standards outline the criteria for initial recognition and measurement of intangibles, assignment of assets and liabilities including goodwill to reporting units, and goodwill impairment testing. The provisions of SFAS No. 141 and SFAS No. 142 will apply to all business combinations after June 30, 2001. The provisions of SFAS No. 142 for existing goodwill and other intangible assets are required to be implemented effective July 1, 2001. Management has evaluated the impact of the standards on the consolidated financial statements and determined that the implementation of SFAS No. 142 will have a significant impact on the consolidated financial statements upon adoption. Forward Looking Statements This report may contain forward-looking statements that are based on current expectations, estimates and projections about the industries in which the Company operates, managements beliefs and assumptions made by management. Words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, and are subject to the safe harbor created thereby. These statements are based on a number of assumptions that could ultimately prove inaccurate and, therefore, there can be no assurance that such statements will prove to be accurate. Factors which could affect actual future results include the developments relating to the state sales and use tax audits and other claims related to investigations or lawsuits. Such factors also include the possibility that increased demand or prices for the Company's services may not occur or continue, changing economic and competitive conditions, technological risks and other risks, changing governmental regulations (including environmental rules and regulations), changes in interest rates and other risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. 19 PART II ITEM 1. Legal Proceedings The Company is a party to a number of lawsuits and claims arising out of the usual course of business. The Company is currently under audit for certain state sales and use tax liabilities and has received a proposed assessment from a state taxing authority in the amount of $2.4 million, including interest and penalties of $0.5 million and $0.2 million, respectively. The Company has recorded a liability of approximately $1.2 million, $0.8 million of which has been capitalized to rental equipment, as management believes the assessment contains certain errors. The liability recorded represents management's best estimate of the ultimate liability. Management is presently reviewing the assessment with the respective state taxing authority. ITEM 6. Exhibits and Reports on Form 8-K A. INDEX TO EXHIBITS B. REPORTS ON FORM 8-K None 20 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on August 8, 2001. By: /s/ Jeffrey J. Fenton ---------------------------------- Jeffrey J. Fenton Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following person in the capacity indicated on August 8, 2001. By: /s/ William F. Fabrizio ---------------------------------- William F. Fabrizio Chief Financial Officer 21

ANTHONY CRANE RENTAL LP 10-Q