The following discussion summarizes the financial position of Essex Rental Corp. and its subsidiaries as of March 31, 2012, and its results of operations for the three month period ended March 31, 2012 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, 2011.

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 for rent crawler cranes and attachments, rough terrain cranes, boom trucks, tower cranes, and other construction related rental equipment. Most attachments are rented separately and increase either the lifting capacity or the reach capabilities of the base crawler cranes and tower cranes. We also offer transportation, rigging and repair and maintenance services while equipment is on rent. 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 4 and 18 months. Boom trucks and other smaller equipment may be rented as frequently as daily. The contracts typically provide for an agreed 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 than 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 services 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, and related costs for amounts paid to third party providers. The key drivers of transportation revenue are crane and attachment and other lifting equipment 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.

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.

In the ordinary course of business, we sell used cranes and attachments and other 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 upon acceptance by the customer or the execution of a definitive sales agreement stipulating the date of transferring the risk of ownership. 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 sale including tower cranes, boom trucks, 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. We also provide repairs 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 crane mechanics. Repair and maintenance revenue is recognized as such services are performed. Parts revenue is recognized at the time of sale. Our parts and services operations are conducted through our Coast Crane subsidiary.

In summary, 76.3% of total revenues were derived from our equipment rental segment for the three months ended March 31, 2012, 3.9% through our equipment distribution segment and 19.8% through our parts and service segment. More specifically, 43.3% of total revenues were generated through equipment rentals, 3.9% through retail equipment sales, 22.4% through used rental equipment sales, 9.8% through retail part sales, 5.7% through rental related transportation services and 10.0% through repair and maintenance services provided with respect to cranes on rent and 4.9% through repair and maintenance services provided otherwise.

The following table provides a summary of the Company's revenue generating activities discussed above expressed as a percentage of total revenues:

                                              Three Months Ended March 31,
                                               2012                   2011

      Equipment rentals                             43.3 %                 48.2 %
      Retail equipment sales                         3.9 %                 17.2 %
      Used rental equipment sales                   22.4 %                  2.1 %
      Retail parts sales                             9.8 %                 13.6 %
      Transportation                                 5.7 %                  6.4 %
      Equipment repairs and maintenance             14.9 %                 12.5 %

Utilization Measurement

Essex Rental Corp. measures utilization using the method referred to as the "days" method. Essex's 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 currently used by Essex, and Essex anticipates that the "days" method will be the primary basis for future disclosure of utilization rates for Essex's 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 month periods ended March 31, 2012 and 2011 for the equipment types owned during those periods.

                                                                         Three Months Ended March 31,
                                                                     2012                            2011

Crawler Cranes                                                             37.0 %                          42.8 %
Rough Terrain Cranes                                                       54.8 %*                         66.8 %
Boomtrucks                                                                 43.0 %                          48.7 %
Self-Erecting Tower Cranes                                                 28.3 %                          18.3 %
City & Other Tower Cranes                                                  47.9 %                          43.2 %
Forklifts and Other Equipment                                              30.4 %**                        39.2 %

* Includes the impact of a 24.5% increase in the number of units available for rent for the three months ended March 31, 2012 compared to the three months ended March 31, 2011

** Includes the impact of the Company's strategic decision to sell equipment within this asset class that is not part of our core strategy and does not leverage our crane expertise.

Current Environment

Management believes that, in the long-term, Essex Crane's strong niche market position and improvements in its 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.

Results of Operations

Three months ended March 31, 2012 compared to the three months ended March 31, 2011

The Company had a net loss of $4.7 million for the three months ended March 31, 2012. Total revenue, cost of revenues and gross profit were $23.7 million, $20.3 million and $3.4 million, respectively, for the three months ended March 31, 2012. Selling, general, administrative and other expenses of $7.3 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 $2.9 million for the three months ended March 31, 2012. The Company had an income tax benefit of $2.1 million for the three months ended March 31, 2012 related to loss before income taxes of $6.8 million.

The Company had a net loss of $4.7 million for the three months ended March 31, 2011. Total revenue, cost of revenues and gross profit were $21.5 million, $18.1 million and $3.3 million, respectively, for the three months ended March 31, 2011. Selling, general, administrative and other expenses of $7.7 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 $2.9 million for the three months ended March 31, 2011. The Company had an income tax benefit of $2.4 million for the three months ended March 31, 2011 related to loss before income taxes of $7.1 million.

Revenues

Revenues for the three months ended March 31, 2012 were $23.7 million, a 10.4% increase compared to revenues of $21.5 million for the three months ended March 31, 2011. The following table provides a summary of the Company's revenues by operating segment:

                                        Three Months Ended March 31,
                                            2012                2011

             Segment revenues
             Equipment rentals        $     18,116,501      $ 13,247,426
             Equipment distribution            916,447         3,698,364
             Parts and service               4,705,237         4,541,380

             Total revenues           $     23,738,185      $ 21,487,170

· Equipment rental segment revenues, which represents 76.3% of total revenues, was $18.1 million for the three months ended March 31, 2012, a 36.8% increase from $13.2 million for the three months ended March 31, 2011. The equipment rental segment includes rental, transportation, rental equipment repairs and used rental equipment sales. Rental revenue, which represented 43.3% of total revenues, was $10.3 million for the three months ended March 31, 2012, a 0.8% decrease from $10.4 million for the three months ended March 31, 2011. Utilization for crawler cranes, as measured on a "days" basis, decreased to 37.0% for the three month period ended March 31, 2012 compared to 42.8% for the same period in the prior year. There was an increase in average crawler crane rental rate of 4.6% to $16,233 (per crane per rental month) for the three months ended March 31, 2012 from $15,516 for the three months ended March 31, 2011. Management does not expect a meaningful increase in average rental rates until utilization rates recover significantly. Transportation revenue, which represents 5.7% of total revenues, was $1.3 million for the three months ended March 31, 2012, a 2.2% decrease from $1.4 million for the three months ended March 31, 2011. The decrease in transportation revenue is directly attributable to the decline in equipment on rent and rental locations of the cranes on rent. Used rental equipment sales revenue was $5.3 million for the three months ended March 31, 2012; a $4.9 million or 1,101.5% increase compared to the three month period ended March 31, 2011. During the quarter ended March 31, 2012, the Company sold 169 pieces of used rental equipment primarily consisting of aerial work platforms acquired in the Coast Acquisition, which are not a part of the Company's long-term strategy. There were no similar aerial work platform sales during the three months ended March 31, 2011.

· Equipment distribution segment revenue, which represents 3.9% of total revenue, was $0.9 million for the three months ended March 31, 2012, a 75.2% decrease from $3.7 million for the three months ended March 31, 2011 and relates to the sale of four pieces of equipment by our Coast Crane subsidiary consisting of two boomtrucks and two rough terrain cranes.

· Parts and service segment revenue, which represents 19.8% of total revenue, was $4.7 million for the three months ended March 31, 2012, a 3.6% increase from $4.5 million for the three months ended March 31, 2011 and relates to parts and service revenues from our Coast Crane subsidiary.

Gross Profit

Gross Profit for the three months ended March 31, 2012 was $3.4 million, a 1.7% increase from gross profit of $3.3 million for the three months ended March 31, 2011. Gross profit margin was 14.3% for the three months ended March 31, 2012, relative to 15.6% for the three months ended March 31, 2011. The following table provides a summary of the Company's gross profit by operating segment:

                                         Three Months Ended March 31,
                                            2012                2011

              Segment gross profit
              Equipment rentals        $     2,010,650       $ 1,847,798
              Equipment distribution            46,148           409,253
              Parts and service              1,347,301         1,091,485

              Total gross profit       $     3,404,099       $ 3,348,536

Equipment rentals segment gross profit of $2.0 million for the three months ended March 31, 2012 increased $0.2 million or 8.8% as compared to the three months ended March 31, 2011. Gain on the sale of used rental equipment was $0.6 million for the three months ended March 31, 2012, a 1,268.1% increase from $46,000 for the three months ended March 31, 2011. The increase in the gain on the sale of used rental equipment was directly attributable to the increased sales of aerial work platforms acquired in the Coast Acquisition during the three months ended March 31, 2012. There were seven sales of aerial work platforms in the three months ended March 31, 2012.

Equipment distribution segment gross profit of $46,000 (5.0% margin) for the three months ended March 31, 2012 decreased $0.4 million or 88.7% from $0.4 million (11.1% margin) for the three months ended March 31, 2011 and relates to equipment distribution gross profit earned by our Coast Crane subsidiary. The decreased gross profit and margin are functions of low sales volume during the three months ended March 31, 2012.

Parts and service segment gross profit of $1.3 million for the three months ended March 31, 2012 increased $0.3 million or 23.4% from $1.1 million for the three months ended March 31, 2011 and relates to parts and service gross profit earned by our Coast Crane subsidiary.

Total selling, general, administrative and other expenses for the three months ended March 31,2012 were $7.3 million, a $0.4 million or 5.1% decrease from $7.7 million for the three months ended March 31, 2011. The decrease was related primarily to decreases in salary expense related to Coast Crane and stock compensation, legal expenses and personal property taxes partially offset by increases related to sales and marketing and audit fees. 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 $0.4 million and $0.5 million of non-cash stock based compensation expense for the three month periods ended March 31, 2012 and 2011, respectively.

Interest expense increased 1.5% to $2.9 million for the three months ended March 31, 2012 from $2.9 million for the three months ended March 31, 2011. The increase in interest expense was related primarily to interest expense incurred on additional borrowings under our credit facilities. Interest expense for the three months ended March 31, 2012 was reduced by the decrease in fair value of undesignated interest swaps by approximately $0.3 million.

Income tax benefit was $2.1 million for the three months ended March 31, 2012 compared to a $2.4 million for the three months ended March 31, 2011. The decrease in income tax benefit is due to a decrease in the pre-tax loss. The effective tax rates were 30.9% and 33.9% for the three months ended March 31, 2012 and 2011, respectively. The effective tax rate decreased from the prior year due to a decrease in state tax rates resulting primarily from changes in apportionment.

Essex had 273 full-time employees at March 31, 2012 compared to 277 full-time employees at March 31, 2011.

Liquidity and Capital Resources

Cash flow from operating activities. The Company's cash used in operating activities for the three months ended March 31, 2012 was $3.1 million. This was primarily the result of net loss of $4.7 million, which, when adjusted for non-cash expense items, such as depreciation and amortization, including amortization of the promissory note discount, of $5.8 million, gains on the sale of rental equipment of $0.6 million, deferred income taxes of $2.1 million, change in fair value of interest rate swap of $0.3 million and stock-based compensation expense of $0.4 million, provided negative cash flows of approximately $1.5 million. The cash flows from operating activities were increased by a $0.2 million decrease in other receivables, a $0.6 million decrease in spare parts inventory and a $0.2 million increase in unearned rental revenue and customer deposits. These cash flow increases were offset by a $1.0 million increase in accounts receivable, $0.1 increase in prepaid expenses a $1.4 million decrease in accounts payable and accrued expenses.

The Company's cash provided by operating activities for the three months ended March 31, 2011 was $1.8 million. This was primarily the result of net loss of $4.7 million, which, when adjusted for non-cash expense items, such as depreciation and amortization, including amortization of the promissory note discount, of $5.7 million, deferred income taxes of $2.3 million, change in fair value of interest rate swap of $0.2 million and stock-based compensation expense of $0.5 million, provided negative cash flows of approximately $1.1 million. The cash flows from operating activities were also decreased by a $0.1 million increase in spare parts inventory and a $2.0 decrease in customer deposits, offset by a $1.2 million decrease in accounts receivable, a $0.4 million decrease in other receivables, a $0.1 million decrease in prepaid expenses, a $2.8 million decrease in retail equipment inventory, and a $0.6 million increase in accounts payable and accrued expenses.

Cash flow from investing activities. For the three months ended March 31, 2012, cash provided by investing activities was approximately $6.0 million. This was primarily the result of a $1.2 million decrease in accounts receivable related to rental equipment sales and $5.3 million in proceeds from the sales of rental equipment. These investing activity sources of cash were partially offset by purchases of rental equipment of $0.5 million and purchases of property and equipment of $0.1 million.

For the three months ended March 31, 2011, cash used in investing activities was approximately $1.8 million. This was primarily the result of purchases of rental equipment of $1.8 million and purchases of property and equipment of $0.5 million. These investing activity uses of cash were partially offset by $0.4 million in proceeds received for the sale of rental equipment.

Cash flow from financing activities. Cash used in financing activities was approximately $4.1 million for the three months ended March 31, 2012. This is primarily due to payments on short-term debt obligations of $0.2 million and net payments on revolving credit facilities of $4.0 million. Total borrowings and payments on the revolving credit facilities were $21.5 million and $25.5 million, respectively, for the period.

Cash provided by financing activities was approximately $16.5 million for the three months ended March 31, 2011. This is primarily due to net proceeds from the exercise of warrants of $19.8 million. Cash provided by financing activities was partially offset by payments on short-term debt obligations of $0.7 million and net payments on revolving credit facilities of $2.6 million. Total borrowings and payments on the revolving credit facilities were $19.4 million and $22.0 million, respectively, for the period.

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 exercise of warrants for shares of common stock, 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 equipment sold of $5.3 million during the three months ended March 31, 2012 were used primarily to pay down our outstanding debt balance. In response to changing economic conditions, we believe we have the flexibility to modify our capital expenditures by adjusting them (either up or down) to match our actual performance. As of March 31 2012, we had approximately $39.9 million of available borrowings under our revolving credit facilities, net of outstanding letters of credit and other reserves, and additionally, approximately $7.8 million of cash on hand; providing the company with $47.7 million of potential liquidity.

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. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under the revolving credit facilities will be adequate to meet our future liquidity needs for the foreseeable future.

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 . . .