ANTHONY CRANE RENTAL HOLDINGS LP, 10-K405, 1999-03-31

ANTHONY CRANE RENTAL HOLDINGS LP
10-K405, 1999-03-31
EQUIPMENT RENTAL & LEASING, NEC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
----------------

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended DECEMBER 31, 1998

[_] 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 HOLDINGS, L.P.
(Exact Name of Registrant as Specified in Its Charter)

PENNSYLVANIA 25-1814367
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

1165 Camp Hollow Road,
West Mifflin, Pennsylvania 15122
(Address of Principal Executive Offices)
(412) 469-3700
(Registrant's 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 March 31, 1999 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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K.[X]

Number of common partnership interests outstanding as of March 31, 1999:

Class L Common Partnership Interests: 456 units
Class A Common Partnership Interests: 4,100 units

Documents incorporated by reference: None
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C> <C>
PART I
1. Business............................................................................... 1
2. Properties............................................................................. 5
3. Legal Proceedings...................................................................... 6
4. Submission of Matters to a Vote of Security Holders.................................... 7
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 7
6. Selected Financial Data................................................................ 8
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 9
8. Financial Statements and Supplementary Data............................................ 17
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 39
PART III
10. Directors and Executive Officers of the Registrant..................................... 39
11. Executive Compensation................................................................. 41
12. Security Ownership of Certain Beneficial Owners and Management......................... 43
13. Certain Relationships and Related Transactions......................................... 44
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................ 46
</TABLE>

Unless otherwise indicated, the terms "Anthony Crane Rental", "Holdings",
"ACR" and "the Company" refer collectively to Anthony Crane Rental Holdings,
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. Certain of these
factors are discussed under item 1--Business.
<PAGE>

PART I

ITEM 1. Business

Partnership interests of Anthony Crane Rental, L.P. (the "Company" or "ACR")
and investment in the capital stock of AC Holdings Corp. account for all of
the assets of Anthony Crane Rental Holdings, L.P. ("Holdings"). Holdings
conducts all of its business through the Company.

The Company is the largest provider of comprehensive crane and lifting
equipment rentals and services in North America. The Company believes, based
on the number and widespread location of its yards, that it is the only
national crane rental company in the highly fragmented U.S. crane rental
industry. The Company has a network of 25 crane rental yards that provide
services to over 8,000 customers in 34 states and the Caribbean. The Company
owns approximately 2,400 pieces of lifting equipment, ranging from 1,000-ton
mobile cranes to two-person aerial work platforms. The Company believes that
its crane fleet represented approximately 15% of the total U.S. crane rental
fleet in 1998. While its primary business is the rental of crane and lifting
equipment, approximately 11% of the Company's 1998 revenues were derived from
sales of new and used equipment. The Company has achieved 32 consecutive years
of revenue growth and compound annual growth rates of revenues and EBITDA (as
defined) from 1993 to 1998 of 23.1% and 21.1%, respectively.

The Company has four subsidiaries. Two of the Company's subsidiaries,
Anthony Sales & Leasing, L.P. , and Anthony International, L.P. conduct
business solely in the Virgin Islands under the terms of a contract with a
single customer. The principal activities of these entities is the rental of
cranes and lifting equipment and the providing of labor services for the
operation, management and maintenance of the equipment. The other two
subsidiaries, Anthony Crane International Equipment Services Corporation and
Anthony Crane Sales and Leasing Corporation have no assets or operations, and
their sole purpose of existence was to facilitate issuance of notes.

ACR was founded by Ray G. Anthony, who entered the crane rental business in
1966 when he took over the family business, a small scrap yard south of
Pittsburgh. Mr. Anthony initially purchased a crane to facilitate moving scrap
metal, and shortly thereafter began receiving calls from parties interested in
renting the crane. As such calls became more frequent, Mr. Anthony purchased
additional cranes and incorporated Anthony Crane Rental, Inc., in 1973. Since
that time, the Company has grown largely through controlled and disciplined
geographic expansion.

The Company has grown by pursuing an operating philosophy focused on serving
the crane and lifting needs of industrial customers in the petrochemical,
paper, steel, utility, mining and multiple other industries. These industrial
customers, which accounted for approximately 70% of the Company's 1998 rental
revenues, frequently rent cranes for regularly scheduled, non-deferrable plant
maintenance activities. These projects can require up to 100 cranes of varying
sizes at any one time and are often extremely time-sensitive, because they
interrupt plant operations. The Company has also been successful in serving
the needs of construction contractors, which accounted for approximately 30%
of 1998 rental revenues. These construction customers rent cranes primarily
for large, long-term public infrastructure and commercial construction
projects, which are generally not deferred once started.

Recapitalization

On June 1, 1998, the Company entered into a recapitalization agreement with
Bain/ACR, LLC. ("Bain"), pursuant to which Bain and certain members of senior
management of the Company (collectively the "Equity Investors") indirectly
acquired an 82% ownership interest in Holdings (the "Recapitalization").
Following the Recapitalization, Holdings has a 99% ownership interest in the
Company. Effective July 22, 1998, the Recapitalization was consummated and the
Company incurred new debt obligations, repaid its outstanding senior notes and
credit agreement obligations, restructured certain of its outstanding Company
interests and distributed approximately $122.3 million in cash and property
with a net book value of approximately $3.6 million to the Predecessor
Partners.

1
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The Recapitalization was funded by: (i) a notes offering by the Company
consisting of $155 million of 10 3/8% Senior Notes due 2008 (the "Senior
Notes"); (ii) a discount debenture offering by Holdings with proceeds of $25
million consisting of 13 3/8% Senior Discount Debentures due 2009 (the
"Discount Debentures"); and (iii) $125 million of borrowings under a new
revolving credit facility and $50 million of borrowings under a term loan
facility (together defined as the "Senior Credit Facilities"). In addition, as
part of the Recapitalization consideration, Holdings distributed $22.5 million
of Senior Preferred Units to the Predecessor Partners.

Crane Rentals

ACR is headquartered in West Mifflin, Pennsylvania and organized into four
regions: Northeast (based in Pittsburgh, PA), Southeast (based in Atlanta,
GA), Central (based in Beaumont, TX), and West (based in Phoenix, AZ). Each of
these regions is headed by a regional manager who supervises five to eight
yards and oversees the movement of equipment within and across regions. These
managers have responsibility for sales and profitability for an individual
region and for the Company as a whole and receive bonuses for local, regional
and company-wide performance. This cooperative management style is intended to
ensure proper fleet deployment and optimal utilization on a company-wide
basis. Additionally, regional managers are responsible for locating promising
growth opportunities, new national customers and new yard sites in their
respective regions. The Company's regional managers average over 27 years of
crane rental experience.

Each yard serves an area within a radius of approximately 150 miles.
Depending on its size, each yard utilizes 20 to 40 skilled crane operators who
have undergone an intensive four-year training and apprenticeship program to
develop their expertise. The majority of these operators are used on an as-
needed basis, which provides ACR with a significant degree of operational and
financial flexibility. In addition, each yard is supervised by its respective
regional manager and staffed with a yard Manager, Crane Specialist,
Dispatcher, two to four sales people, an in-house maintenance department and a
small financial and administrative staff. The Yard Manager oversees the day-
to-day management of equipment, employees and local customers and approves all
pricing decisions.

Throughout its history, the Company has continually reviewed its options to
expand both within and across regions by adding new yards, often at the
initial request of one of its existing customers. ACR evaluates these
opportunities, applying financial and market-related criteria, and if
appropriate, enters a market through a single yard. As the Company gains new
customers in this market, it continues to build the size of its fleet. This
initial yard then serves its market and adjoining markets until the Company
develops a sufficient revenue base to support further expansion, at which
point ACR opens a new yard in a contiguous market. ACR has used this
disciplined expansion strategy to expand regionally into the Southeast and
Central regions, and more recently to enter the West region.

Fleet management, which is the process of purchasing, dispatching,
maintaining and selling rental equipment, is one of the most critical
operational elements for crane rental companies. As part of its fleet
management program, the Company monitors utilization on a crane-by-crane
basis, using a tracking system that indicates, by yard, the number of cranes
currently utilized or reserved and the number and types of cranes available.
The Company's fleet management program facilitates decisions regarding: (i)
asset mix at individual yards; (ii) movements of equipment on an intra-
regional and inter-regional basis; and (iii) relocation and divestiture of
underperforming assets.

Crane Sales

While the majority of its revenues result from crane rentals and services,
the Company engages in two forms of crane sales and has a dedicated staff
focused on maximizing returns in this business. First, the Company purchases
cranes directly from manufacturers and acts as a dealer in sales to third
parties, which has historically generated a relatively small percentage of the
Company's total revenues (5.3%) in 1998. As a dealer and the largest non-
government crane purchaser in the United States, the Company benefits from
both wholesale and

2
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volume-driven purchase discounts. Additionally, by participating in the new
crane sales business, the Company has access to up-to-date crane market and
product information, which aids ACR in marketing its used equipment and in
advising its rental customers regarding equipment selection.

Second, the Company's proactive fleet management program is designed to
match the Company's rental product offerings with regional market demand. As
part of this program, once management determines that a piece of equipment is
being underutilized in a particular yard, the equipment is either relocated to
achieve higher utilization rates or sold. The Company's preventative
maintenance programs and its knowledge of the global market for crane sales
allow it to generate consistent average returns on sales of used equipment to
both domestic and international purchasers. For example, from 1994 to 1998,
ACR sold its used equipment for an average of greater than 90% of its original
cost. The Company has historically reinvested these sales proceeds in new
equipment selected to meet customer demand and maintain optimal fleet mix.

Customers, Sales and Marketing

The Company's customer base consists of over 8,000 customers in 34 states
and the Caribbean. Examples of the Company's key customers include: Hess Oil,
USX Corp., Mobil Corp., Huntsman Corp., Florida Power and Light Co.,
International Paper Co., Proctor & Gamble Co. and Bayer AG.

Over 60% of the Company's rental revenues are derived from customers who
rent cranes on an operated and maintained basis, which means that the rentals
include an experienced operator. These types of rentals also tend to include
value-added services, such as the services of a Crane Specialist who provides
equipment recommendations and specifications for a potential lift. The
remainder of ACR's rental revenues are on a bare basis (i.e., without an
operator). Additionally, approximately 75% of ACR's rentals are for greater
than one month, with the majority lasting for two to four months.

In 1998, approximately 70% of the Company's rental revenues were derived
from industrial customers. The Company believes that its industrial customer
base provides stable demand for crane rentals, as such customers tend to
require a certain level of predictable and necessary plant maintenance
regardless of economic conditions. Approximately 30% of the Company's rental
revenues in 1998 were from construction contractors, who primarily utilize
cranes for public infrastructure and commercial construction for a wide
variety of industries. These construction projects tend to be large, long-term
projects that generally demand value-added services and lifting expertise, and
which are generally not deferred once started.

The Company believes its diverse customer base mitigates the impact of an
economic downturn related to a particular customer, industry or geographic
region. Management estimates that in 1998, of the specific end-user groups for
which it records such data, no single industry accounted for over 13% of
rental revenues. In 1998, no single customer accounted for over 2% of rental
revenues, except for one industrial customer who represented 6% of rental
revenues and for whom the Company provides fleet management services under the
terms of an exclusive contract. The Company's customer base is also
diversified by geography, which helps to insulate the Company from regional
economic downturns and seasonality and enables ACR to optimize fleet
utilization as equipment can be moved in response to fluctuations in demand
across ACR's markets. No single region accounted for greater than 26% of the
Company's 1998 rental revenues.

The Company has created and continues to develop its diverse and extensive
customer base through a proactive marketing strategy. The Company employs an
experienced staff of over 70 full-time sales personnel to reach new customers
and maintain existing relationships. ACR believes that its marketing approach
fosters long-term, multi-location crane rental relationships, and enables the
Company to drive market share gains and consolidate its position as the number
one choice in crane rental services. This strategy differs from those of the
Company's smaller local and regional competitors, whose marketing efforts have
traditionally been limited to yellow pages and other print advertising which
typically attracts sporadic and smaller users of cranes and lifting services.

3
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Competition

The crane rental industry is highly fragmented and is served by a distinct
set of companies who focus almost exclusively on crane and lifting equipment
rental. ACR generally competes with a small number of regional crane rental
companies (who typically own less than 200 cranes) and hundreds of local crane
rental companies (who typically own less than 50 cranes). Management believes
that general equipment rental companies have not significantly participated in
the crane rental market because they are less able to meet the broad needs of
crane rental customers for several reasons, including: (i) the high levels of
expertise and commitment required to provide a full range of value-added
lifting services, such as highly qualified, well trained operators and lift
planning; (ii) the substantial amount of capital dedicated to cranes and
lifting equipment required to provide the fleet size and selection necessary
to meet the broad demands of larger customers; and (iii) the significant
maintenance programs required to ensure equipment reliability and safety.

Equipment

The Company has a total of approximately 4,300 pieces of equipment, of which
approximately 2,400 pieces are comprised of cranes and lifting equipment, with
the remainder comprised of support vehicles (including tractors, trailers and
mechanics' vehicles). As of December 31, 1998, the original cost of the
Company's equipment, in the aggregate, was greater than $406 million. ACR is
the largest non-government purchaser of cranes in North America and
consequently benefits from volume-driven purchase discounts. The large scale
of the Company's fleet, in conjunction with its broad geographic coverage and
customer base, allow it to purchase specialized, often expensive equipment
that smaller competitors or individual crane users could not justify.

Employees

As of December 31, 1998, the Company had 687 full time employees.
Approximately 30 employees were employed at the corporate headquarters in West
Mifflin, Pennsylvania and were involved in administrative functions. The
remaining employees were located at ACR's various operating yards and were
engaged in management, sales and marketing, maintenance and administrative
functions. In addition, as of December 31, 1998, the Company contracted with
approximately 760 crane operators on an as-needed basis. The majority of these
crane operators were unionized and, as of December 31, 1998, approximately 15%
of the Company's full time employees were unionized. The Company has never
experienced a material work stoppage and considers its overall relations with
its work force to be good.

The Company believes that its employees are an invaluable source of industry
expertise. ACR's ability to draw upon the vast experience of its employees
enables the Company to provide extensive, value-added services. In-house
training ensures that ACR's operators are at the forefront of industry best
practices and are able to operate the best available equipment in a safe,
efficient manner. The Company's employees and operators also provide ACR with
substantial market data, which contributes to more efficient fleet utilization
and consequently stronger financial results.

4
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ITEM 2. Properties

The following table sets forth certain information regarding significant
facilities operated by the Company as of December 31, 1998:

<TABLE>
<CAPTION>
Facility
Square Owned or
Location Acres Footage Purpose Leased
- --------- ----- -------- ------- --------
<S> <C> <C> <C> <C>
California
Fontana.......................... 5.0 7,200 Regional Office Leased
Richmond......................... 5.3 12,000 Regional Office Owned
San Diego........................ 4.3 6,000 Regional Office Leased
Wilmington....................... 6.4 26,420 Regional Office Owned
Arizona
Phoenix.......................... 8.7 33,800 Regional Office Owned
Texas
Beaumont......................... 8.8 21,000 Regional Office Owned
Dallas........................... 3.1 5,380 Regional Office Owned
Jacinto Port..................... 13.2 20,720 Maintenance Owned
La Porte......................... 5.4 9,940 Regional Office Owned
North Houston.................... 3.6 18,000 Regional Office Owned
Louisiana
West Lake........................ 6.5 21,962 Regional Office Owned
North Carolina
Charlotte........................ 1.5 500 Regional Office Leased
South Carolina
Columbia......................... 4.5 16,800 Regional Office Owned
Georgia
Atlanta.......................... 32.0 34,884 Regional Office Owned
Augusta.......................... 12.6 12,556 Regional Office Owned
Savannah......................... 14.9 26,390 Regional Office Owned
Florida
Miami............................ 2.1 160 Regional Office Leased
Pompano.......................... 3.4 15,440 Regional Office Owned
West Palm Beach.................. 3.0 15,100 Regional Office Leased
U.S. Virgin Islands
St. Croix........................ N/A N/A Contract Office Cust. Facility
Pennsylvania
Mercer........................... 17.6 18,050 Regional Office Owned
Monroeville...................... 5.9 39,100 Regional Office Owned
Philadelphia..................... 8.0 19,350 Regional Office Owned
West Mifflin (Pittsburgh)........ 28.5 45,760 Corp. & Reg. Owned
Offices
West Virginia
Nitro (Charleston)............... 5.8 29,220 Regional Office Owned
</TABLE>

To the extent any such properties are leased, the Company expects to be able
to renew such leases or lease comparable facilities on terms commercially
acceptable to the Company. Management believes that the Company's facilities
are suitable for its operations and provide sufficient capacity to meet the
Company's requirements for the foreseeable future.

5
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ITEM 3. Legal Proceedings

The Company is the defendant in a lawsuit by its former insurance carrier
who has asserted a claim for premiums allegedly due on a contract of insurance
in the amount of approximately $455,000. The Company has denied any liability
and intends to vigorously defend the claim.

Additionally, the Company is the defendant in a lawsuit asserting breach of
contract and tort claims arising out of allegations the Company did not timely
deliver certain used equipment that the customer contracted to buy from the
Company. The Company has denied any liability and intends to vigorously defend
the claims.

The Company is also the defendant in a lawsuit resulting from negotiations
in connection with a proposed acquisition in which the potential seller is
seeking contractual damages in the amount of $3 million plus other
consequential damages that may be proved at trial for breach of contract and
the confidentiality provisions in a letter of intent executed between the
parties. The Company has denied any liability and intends to vigorously defend
the claims.

The Company is a party to a number of other 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
Predecessor Partners, as described below.

Environmental, Health and Safety Matters

The Company and its operations are subject to federal, state and local
environmental and occupational health and safety laws and regulations,
including laws and regulations governing petroleum storage, waste water
discharge, underground storage tanks, hazardous chemical reporting and
hazardous waste disposal. Based upon the findings of an environmental
assessment conducted in connection with the Recapitalization, the Company
believes it is in material compliance with such requirements. The Company
spent approximately $100,000 in 1998 to close and upgrade certain underground
storage tanks to comply with the U.S. EPA 1998 deadline for attaining certain
technical standards for such tanks. The Company does not anticipate any
material capital expenditures in 1999 for environmental controls. The
enactment of more stringent laws or regulations or stricter interpretation of
existing laws and regulations could require additional expenditures by the
Company, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

Like all businesses, the Company is subject to liability for the
investigation and remediation of environmental contamination (including
contamination caused by other parties) at the properties it owns or operates
and at other properties where the Company or its predecessors have arranged
for the disposal of hazardous substances. While management is not aware of any
current matters, there is no assurance that the Company will not be subject to
such matters in the future, and the amount of such liability could have a
material adverse effect on the Company's business, financial condition and
results of operations.

The Company is currently investigating and delineating soil and groundwater
contamination at its Savannah, Georgia location that resulted from former
gasoline underground storage tanks that were removed in 1994. These activities
are being conducted under the oversight of the Georgia Department of Natural
Resources. Following delineation, either active remediation or continued
monitoring of contamination will likely be required. The cost of such work is
not yet known, but the Company expects that it will receive reimbursement for
such costs from the Georgia Underground Storage Tank Trust Fund. To date, the
Company has been approved for reimbursement for $80,000 to delineate the
contamination. The reimbursement limit under the Trust Fund is $1 million. The
Company believes that it is unlikely that its costs will exceed the
reimbursement limit.

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Recapitalization

In connection with the Recapitalization, the Predecessor Partners have
agreed to indemnify the Company for matters that breach the certain
representations and warranties set forth in the Recapitalization Agreement.
Such indemnification is limited to claims submitted within four years
following the Recapitalization, subject to a $1.6 million deductible and a $16
million cap, when aggregated with other indemnified matters. There can be no
assurance that the Predecessor Partners will have the ability to fulfill their
indemnification obligations if called upon to do so by the Company.

In addition, the Recapitalization Agreement provided for an adjustment of
the distribution made to the Predecessor Partners based on consolidated net
worth (as defined in the Recapitalization Agreement), as of the closing date.
The amount of the adjustment has not yet been determined.

Sales and Use Tax

The Company is currently under audit for certain state and local sales and
use tax liabilities and has received a proposed assessment from a local taxing
authority in the amount of $8.6 million. Upon review of the assessment,
management has identified a significant amount that it believes was calculated
by assessing duplicate tax on specific cranes. The Company has recorded a
liability of approximately $3.2 million at December 31, 1998 for such tax
liabilities. Management is presently negotiating its liability with the
respective local taxing authority and believes there is a reasonable
possibility that the final tax assessment may exceed the amount presently
recorded.

ITEM 4. Submission of Matters to a Vote of Security Holders

During the year ended December 31, 1998, no matter was submitted to a vote
of the security holders of the Company.

PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters

Not applicable.

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ITEM 6. Selected Financial Data

Summary Consolidated Financial Information and Other Data

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues:
Equipment rentals........ $ 85,369 $106,593 $128,161 $156,408 $183,684
Equipment sales.......... 7,762 9,419 19,444 27,400 22,975
-------- -------- -------- -------- --------
Total revenues............. 93,131 116,012 147,605 183,808 206,659
Cost of revenues:
Cost of equipment
rentals................. 50,908 62,533 78,049 97,036 110,629
Cost of equipment sales.. 5,206 7,039 13,643 15,541 18,920
-------- -------- -------- -------- --------
Total cost of revenues..... 56,114 69,572 91,692 112,577 129,549
Gross profit............... 37,017 46,440 55,913 71,231 77,110
Selling, general and
administrative expenses... 20,567 23,351 29,211 35,111 40,534
-------- -------- -------- -------- --------
Income from operations..... 16,450 23,089 26,702 36,120 36,576
Interest expense........... 6,281 8,482 10,873 13,962 27,738
Other (income) expense..... 6 (104) (69) (1,739) (104)
-------- -------- -------- -------- --------
Income before extraordinary
item and taxes............ 10,163 14,711 15,898 23,897 8,942
Provision (benefit) for
state taxes............... 154 583 (102) 96 220
-------- -------- -------- -------- --------
Income before extraordinary
item...................... 10,009 14,128 16,000 23,801 8,722
Extraordinary item......... -- -- -- -- 15,811
-------- -------- -------- -------- --------
Net income (loss).......... $ 10,009 $ 14,128 $ 16,000 $ 23,801(1) ($ 7,089)
======== ======== ======== ======== ========
Other Data:
Net cash provided by
operating activities...... $ 22,410 $ 27,695 $ 32,411 $ 30,697 $ 35,133
Net cash used by investing
activities................ (40,938) (36,907) (56,349) (66,976) (85,089)
Net cash provided by
financing activities...... 11,013 8,722 26,370 32,066 51,214
Ratio of earnings to fixed
charges (2)............... 2.6x 2.7x 2.4x 2.5x 1.3x
EBITDA (3)................. 28,724 38,922 44,836 47,365 60,557
Total depreciation and
amortization (4).......... 14,408 17,653 22,061 21,904(1) 26,785
Net gains on sales of used
rental equipment.......... 2,134 1,820 3,926 10,659 2,804
Total capital
expenditures.............. 42,496 45,241 82,673 92,167 115,512
Original cost of property
and equipment............. 197,264 238,544 295,405 361,772 445,790
Original cost of rental
equipment................. 174,090 201,972 248,406 295,297 376,919
Balance Sheet Data:
Cash and cash equivalents.. $ 6,646 $ 6,156 $ 8,588 $ 4,375 $ 5,633
Total assets............... 164,576 196,053 241,239 306,928 392,192
Total debt................. 94,427 108,000 140,000 185,961 380,427
Total liabilities.......... 100,444 115,908 150,378 205,512 408,997
Total partners' capital
(deficit)................. 64,132 80,145 90,861 101,416 (16,805)
</TABLE>
- --------
(1) Reflects the decrease in depreciation of $5.7 million for the year ended
December 31, 1997 for the revision in estimated salvage values used for
depreciating certain rental equipment.
(2) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents income before taxes plus fixed charges. "Fixed
charges" consist of interest expense, amortization of deferred financing
costs and the component of rental expense that management believes is
representative of the interest component of rental expense.
(3) EBITDA represents income from operations less the net gain on sales of
used rental equipment plus depreciation and amortization. EBITDA is a
widely accepted financial indicator of a company's ability to service and
incur debt. EBITDA does not represent net income or cash flows from
operations as those terms are defined by generally accepted accounting
principles ("GAAP"), and does not necessarily indicate whether cash flows
will be sufficient to fund cash needs. Holdings' measure of EBITDA may
not be comparable to those reported by other companies.
(4) Excludes amortization of deferred financing fees.

8
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ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The following discussion should be read in conjunction with the more
detailed information and the historical financial statements, including notes
thereto, appearing elsewhere in this Form 10-K.

Overview

The Company is the largest crane rental company in North America. The
Company's primary source of revenue is the rental of cranes and lifting
equipment for a variety of applications, most of which involve industrial
repair and maintenance activity. Over the past thirty-two years, the Company
has grown by pursuing an operating philosophy focused on the crane and lifting
equipment needs of industrial companies in the petrochemical, paper, steel,
utility, mining and other industries, and major non-residential construction
contractors. In addition to its primary business of renting equipment, the
Company also derives revenue from the sales of new equipment as a dealer for
selected manufacturers and used equipment as part of its fleet management
program. Equipment sales can fluctuate based on the Company's fleet management
program and market conditions. Fleet management, which is the process of
purchasing, dispatching, maintaining and selling rental equipment, is one of
the most critical operational elements for crane rental companies. The
Company's revenues are dependent on several factors, including demand for
rental equipment, the amount of equipment available for rent, rental rates and
general economic conditions.

The Company's revenues have increased by 183.4% over the past five years,
and have increased in each of the past 32 years. Equipment rental revenues
increased by more than 17% in each of the last five years. Since 1995, the
Company has grown by expanding its existing yards, opening new yards and
acquiring other crane rental companies. Typically, costs associated with the
opening of new yards or the purchases of new equipment are incurred up to 12
months prior to realizing the full benefit of the revenue stream generated by
such yards or equipment.

The Company is a limited partnership organized under the laws of
Pennsylvania, as a result of which (i) the Company is not itself subject to
federal and certain state (except for Texas) income tax; (ii) the taxable
income of the Company's businesses in the United States will be allocated to
the equity holders of Holdings; and (iii) such equity holders will be
responsible for income taxes on such taxable income. The Company intends to
make distributions to equity holders of Holdings to enable them to meet their
tax obligations with respect to income allocated to them by the Company.

Effective July 22, 1998, the Company completed a recapitalization whereby
the Company incurred new debt obligations, repaid its outstanding senior notes
and credit agreement obligations, restructured certain partnership interests
and distributed cash and property to the Predecessor Partners.

Results of Operations

Year ended December 31, 1998 Compared to the Year Ended December 31, 1997

Equipment Rental Revenues. Revenues from equipment rentals increased $27.3
million, or 17.4%, to $183.7 million for the year ended December 31, 1998 as
compared to $156.4 million for the year ended December 31, 1997. This increase
was largely due to the continued growth at the Company's existing yards,
reflecting the impact of the equipment purchased in 1997 and 1998 and the
start up of six rental yards opened in 1997, including three operations in
California which are beginning to reach targeted operating levels.

Equipment Sales. Revenues from equipment sales decreased $4.4 million, or
16.1%, to $23.0 million for the year ended December 31, 1998 as compared to
$27.4 million for the year ended December 31, 1997. The majority of this
decrease was attributable to the Company's decision to reduce sales of used
equipment in connection with its fleet management program.

9
<PAGE>

Total Revenues. Based on the foregoing, total revenues increased $22.9
million, or 12.4%, to $206.7 million for the year ended December 31, 1998 as
compared to $183.8 million for the year ended December 31, 1997.

Gross Profit. Gross profit from equipment rentals increased $13.7 million,
or 23.0%, to $73.1 million for the year ended December 31, 1998 as compared to
$59.4 million for the year ended December 31, 1997. This increase was
primarily the result of the increased equipment rental revenues as previously
discussed, offset in part by an increase in direct operating expenses
primarily associated with the rental yards opened during 1997. As a percent of
equipment rental revenues, gross profit from equipment rentals increased to
39.8% for the year ended December 31, 1998 as compared to 38.0% for the year
ended December 31, 1997. This increase in gross profit margin is primarily
attributable to (i) improved profitability of the rental yards opened in 1997
as a result of better equipment utilization and (ii) management's efforts to
maintain and control costs.

Gross profit from equipment sales decreased $7.8 million, or 65.8%, to $4.1
million for the year ended December 31, 1998 as compared to $11.9 million for
the year ended December 31, 1997. As a percent of equipment sales revenues,
gross profit declined to 17.6% for the year ended December 31, 1998 as
compared to 43.3% for the year ended December 31, 1997. The gross profit and
gross margin percentage decreases were due to the Company's decision to sell a
lesser amount of used rental equipment under its fleet management program
during the year ended December 31, 1998 compared to the year ended December
31, 1997, coupled with the unusually large margins obtained on the sale of
certain cranes in the year ended December 31, 1997.

Based on the foregoing, total gross profit increased $5.9 million, or 8.3%,
to $77.1 million for the year ended December 31, 1998 compared to $71.2
million for the year ended December 31, 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.4 million, or 15.4%, to $40.5 million for
the year ended December 31, 1998 compared to $35.1 million for the year ended
December 31, 1997. This increase is primarily attributable to an increase in
salaries and wages and related benefit costs associated with the new yards
opened during 1997. As a percent of total revenues, selling, general and
administrative expenses remained relatively consistent, equaling 19.6% for the
year ended December 31, 1998 as compared to 19.1% for the year ended December
31, 1997. Based upon the Company's historical experience, a new location tends
to incur costs during the early period of operations without the benefit of
the revenue stream representative of a mature location. As new locations
mature, selling, general and administrative expenses as a percent of revenues
are expected to decline.

Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA (as
defined to exclude net gains on sales of used equipment) increased $13.2
million, or 27.9%, to $60.6 million for the year ended December 31, 1998,
compared to $47.4 million for the year ended December 31, 1997. EBITDA from
equipment rentals (as defined to represent revenues from equipment rentals,
less cost of equipment rentals, less selling, general and administrative
expenses, plus depreciation and amortization) increased $13.1 million, or
28.5%, to $59.3 million for the year ended December 31, 1998, compared to
$46.2 million for the year ended December 31, 1997. As a percent of rental
revenues, EBITDA from rental operations increased to 32.3% for the year ended
December 31, 1998, compared to 29.5% for the year ended December 31, 1997.
This increase is primarily due to the equipment rental revenues factors
discussed above.

Interest Expense. Interest expense increased $13.8 million, or 98.7%, to
$27.7 million for the year ended December 31, 1998 compared to $14.0 million
for the year ended December 31, 1997. This increase reflects the higher level
of borrowings outstanding attributable to the Company's recapitalization
transaction consummated in July 1998 as well as the Company's continued
investment in rental equipment and the opening of new yards.

Other Income. Other income decreased $1.6 million, or 94.0%, to $0.1 million
for the year ended December 31, 1998 as compared to $1.7 million for the year
ended December 31, 1997. This decrease is primarily attributable to the sale
of property in December 1997 which generated income of approximately $1.4
million. No such sale of property occurred during 1998.

10
<PAGE>

Extraordinary Items. In connection with the recapitalization transaction
consummated in July 1998, the Company recorded a one-time charge of $15.8
million primarily resulting from penalties associated with the prepayment of
the Company's old debt.

Net (Loss) Income. Net Income decreased $30.9 million, or 129.8%, to a net
loss of $7.1 million for the year ended December 31, 1998, compared to net
income of $23.8 million for the year ended December 31, 1997 as a result of
the factors discussed above.

Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996

Equipment Rental Revenues. Revenues from equipment rentals increased $28.2
million, or 22.0%, to $156.4 million for the year ended December 31, 1997,
compared to $128.2 million for the year ended December 31, 1996. This increase
was largely due to the continued growth at the Company's existing rental yards
as well as a result of new rental equipment purchased in 1997, rental
equipment purchased in 1996 becoming more fully utilized and the start-up of
six rental yards, including three yards in California.

Equipment Sales. Revenues from equipment sales increased $8.0 million, or
40.9%, to $27.4 million for the year ended December 31, 1997 as compared to
$19.4 million for the year ended December 31, 1996. This increase was
primarily attributable to significantly higher levels of activity in the
Company's fleet management program through upgrading the fleet and selling
older and under-utilized cranes.

Total Revenues. Based on the foregoing, total revenues for the year ended
December 31, 1997 increased $36.2 million, to $183.8 million as compared to
revenues of $147.6 million for the prior year.

Gross Profit. Gross profit from equipment rentals increased $9.3 million, or
18.5%, to $59.4 million for the year ended December 31, 1997 as compared to
$50.1 million for the year ended December 31, 1996. The increase in gross
profit from equipment rentals was a result of the increased revenues as
previously discussed, offset in part by an increase in direct operating
expenses, primarily attributable to equipment lease expense (relating to a
sale/leaseback transaction in December 1996) of $3.2 million, or 2.0% of total
equipment rental revenues, as well as new yards opened in 1997. Gross profit
from equipment rentals was also impacted by the Company's decision in 1997 to
revise its estimate of the salvage values used for depreciating certain rental
equipment, which had the effect of improving gross profit by $5.7 million,
offset in part by an increase in depreciation expense of $5.4 million as a
result of the significant capital expenditures incurred in 1997 and 1996. As a
percent of equipment rental revenues, gross profit decreased to 38.0% for the
year ended December 31, 1997 from 39.1% for the year ended December 31, 1996.
This decrease was primarily attributable to the factors discussed above.

Gross profit from equipment sales increased $6.1 million, or 104.4%, to
$11.9 million for the year ended December 31, 1997 as compared to $5.8 million
for the year ended December 31, 1996. As a percent of equipment sales
revenues, gross profit increased to 43.3% for the year ended December 31,
1997, from 29.8% for the year ended December 31, 1996. These increases were
attributable to the increased equipment sales revenues as previously
discussed, as well as the unusually high margins earned on certain equipment
sales during 1997.

Based on the foregoing, total gross profit increased $15.3 million, or
27.4%, to $71.2 million for the year ended December 31, 1997 as compared to
$55.9 million for the year ended December 31, 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.9 million, or 20.2%, to $35.1 million for
the year ended December 31, 1997 compared to $29.2 million for the year ended
December 31, 1996. This increase was primarily attributable to increased
salaries and wages and employee benefits associated with the new yards opened
during 1997. As a percent of total revenues, selling, general and
administrative expenses decreased to 19.1% of total revenues for the year
ended December 31, 1997 as compared to 19.8% of total revenues for the year
ended December 31, 1996. The decrease in selling, general

11
<PAGE>

and administrative expenses as a percent of total revenues was largely due to
the significant increase in revenues from equipment sales during 1997. As a
percent of equipment rental revenues, selling, general and administrative
expenses decreased to 22.4% for the year ended December 31, 1997 as compared
to 22.8% for the year ended December 31, 1996.

Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA (as
defined to exclude net gains on sales of used equipment) increased $2.6
million, or 5.6%, to $47.4 million for the year ended December 31, 1997 as
compared to $44.8 million for the year ended December 31, 1996. EBITDA from
equipment rentals, (as defined to represent revenues from equipment rentals,
less costs of equipment rentals, less selling, general and administrative
expenses, plus depreciation and amortization) increased $3.2 million, or 7.5%,
to $46.2 million for the year ended December 31, 1997 as compared to $43.0
million for the year ended December 31, 1996. These increases were primarily
attributable to the increase in rental revenues, as previously discussed. As a
percent of rental revenues, EBITDA from equipment rentals decreased to 29.5%
for the year ended December 31, 1997 as compared to 33.5% for the year ended
December 31, 1996. This decrease was primarily attributable to the increase in
equipment lease expense as a result of a sale/leaseback transaction in
December 1996, as well as the new rental yards opened in 1997.

Interest Expense. Interest expense increased $3.1 million, or 28.4%, to
$14.0 million for the year ended December 31, 1997 as compared to $10.9
million for the year ended December 31, 1996. This increase reflected the
higher level of borrowings outstanding attributable to the Company's continued
investment in rental equipment and the new rental yards opened during 1997.

Other Income. Other income increased $1.6 million to $1.7 million for the
year ended December 31, 1997 as compared to $0.1 million for the year ended
December 31, 1996. This increase was primarily the result of a gain on the
sale of property purchased for resale by the Company.

Net Income. Net income increased $7.8 million, or 48.8%, to $23.8 million
for the year ended December 31, 1997 as compared to $16.0 million for the year
ended December 31, 1996. This increase reflected the factors discussed above.

Liquidity and Capital Resources

During the years ended December 31, 1998, 1997, and 1996, the Company's
primary sources of funds consisted of net cash provided by operating
activities, proceeds from the sale of used rental equipment, borrowings under
its credit agreements and proceeds from the issuance of Senior Notes and
Discount Debentures. Additionally, in 1996, proceeds of $24.1 million were
received from a sale/leaseback transaction, and in 1997, $59.0 million in net
proceeds from the issuance of privately placed senior notes. Net cash provided
by operating activities for the year ended December 31, 1998 increased to
$35.1 million, or 14.5%, from $30.7 million for the year ended December 31,
1997. The increase was primarily the result of improved operating results
partially offset by increased interest expense on debt incurred as part of the
Recapitalization. Net cash provided by operating activities for the year ended
December 31, 1997 decreased to $30.7 million from $32.4 million for the year
ended December 31, 1996, as a result of an increase in working capital
partially offset by an increase in net income.

During the years ended December 31, 1998, 1997 and 1996, the Company's
principal uses of cash for investing activities were for capital expenditures,
including expenditures for rental equipment. Total capital expenditures were
$102.5 million, $85.6 million and $81.2 million, respectively. Included in
these totals were expenditures for rental equipment totaling $92.3 million,
$64.2 million and $77.0 million, respectively. These expenditures were made to
increase the Company's total investment in its rental fleet and to replace
sold used rental equipment. Total proceeds from the sale of fixed assets,
including rental equipment, decreased 36.0% to $14.4 million for the year
ended December 31, 1998 from $22.5 million for the year ended December 31,
1997. Total proceeds from the sale of fixed assets, including rental
equipment, totaled $8.3 million for the year ended December 31, 1996.

12
<PAGE>

For the year ended December 31, 1998, net cash provided by financing
activities was $51.2 million, an increase of 59.7%, compared to $32.1 million
for the year ended December 31, 1997. The increase in net cash provided by
financing activities was due to an increase in net borrowings and equity
proceeds as a result of the Recapitalization, as well as borrowings to fund
capital expenditures, offset by an increase in partner distributions,
primarily related to the Recapitalization. Net cash provided by financing
activities increased 21.6% to $32.1 million for the year ended December 31,
1997 as compared to $26.4 million for the year ended December 31, 1996. This
increase was due to higher net borrowings to fund capital expenditures and
acquisitions, offset by an increase in partner withdrawals.

The Company has no long-term minimum purchase commitments for rental
equipment. Management has budgeted $85 million for gross fleet capital
expenditures for 1999, exclusive of acquisitions, to be used to replace rental
equipment sold as well as increase its total investment in the fleet. These
expenditures will be partially offset by expected proceeds from the sale of
used equipment of approximately $25 million. The Company also expects to spend
approximately $8 million in 1999 on non-rental related capital expenditures
consisting of buildings, land, furniture & fixtures, support equipment and
machinery and tools. In addition to the budgeted capital expenditures, the
Company is currently considering several potential acquisitions. In 1998 and
1997, the Company incurred operating lease expense of approximately $3.1
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.

On March 23, 1999, the Company entered into an agreement to acquire all of
the outstanding common stock of Husky Crane, Inc. (Husky Crane) and certain
assets of Paradise Equipment Company, L.P., a limited partnership in which the
100% stockholder of Husky Crane is the majority partner, as well as certain
other assets owned personally by this stockholder. The aggregate purchase
price is $12.7 million, subject to certain post-closing purchase price
adjustments. The acquisition will be recorded utilizing the purchase method of
accounting.

In connection with the Recapitalization, the Company and 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 its subsidiaries, including the Company, to
meet its debt service obligations under the Discount Debentures. The Company's
liquidity needs relate to working capital, debt service, capital expenditures
and potential acquisitions.

The Company intends to fund its working capital, capital expenditures and
debt service requirements through cash flows generated from operations and
borrowings under the Senior Credit Facilities. The Senior Credit Facilities
consist of a $275.0 million, non-amortizing revolving Credit Facility of which
a net amount of $148.0 million was drawn at December 31, 1998, and a $50.0
million non-amortizing Term Loan. Amounts under the Revolving Credit Facility
are 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.

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 December 31, 1998, the Company and Holdings were in full
compliance with the financial covenants and expect to remain in compliance for
the foreseeable future, including with respect to the minimum interest
coverage ratio.

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<PAGE>

Impact of Recently Issued Accounting Standards

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, " Reporting
Comprehensive Income," which establishes standards for reporting and
displaying comprehensive income and its components. SFAS No. 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. The
provisions of SFAS No. 130 have been adopted in the year ended December 31,
1998 and all years presented have been adjusted to reflect the adoption.

The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," which establishes standards for the way public
business enterprises report information about operating segments in annual
financial statements and related disclosures about products and services,
geographic areas and major customers. Management has evaluated the impact of
this standard on the consolidated financial statements and determined that the
standard has no impact on the consolidated financial statements.

The FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and
Other Post-Retirement Benefits," which revises employers' disclosures about
pension and other post-retirement benefit plans by standardizing the
disclosure requirements for pensions and other post-retirement benefits to the
extent practicable, requiring additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminating certain disclosures that are no longer as useful.
The provisions of SFAS No. 132 have been adopted in the year ended December
31, 1998, and have not had a significant impact on the Company's employee
benefit plan disclosures.

The FASB issued SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities," which establishes accounting and reporting standards for
derivatives and hedging activities. The pronouncement is effective for fiscal
quarters of fiscal years beginning after June 15, 1999. Management has
evaluated the impact of this standard on the consolidated financial statements
and determined that the standard currently will have no impact on the
consolidated financial statements upon adoption.

Impact of Year 2000 Issue

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.

Based on prior assessments, the Company determined that its information
technology systems required modification or replacement of portions of
hardware and software so that those systems would properly utilize dates
beyond December 31, 1999. The Company utilized both internal and external
resources to reprogram, or replace, test and implement the software and
hardware for Year 2000 modifications. The total cost of the Year 2000 project,
which was completed in 1998, was approximately $650,000 and was funded through
operating cash flows. The majority of the costs incurred were capitalized.
With the completion of the Year 2000 project, management now believes that its
internal information technology systems are Year 2000 compliant.

The Company is also evaluating the Year 2000 compliance programs of its
critical customers, suppliers and service providers in an attempt to determine
the adequacy of their programs in addressing the Year 2000 issue. A failure by
a critical supplier or group of critical customers could negatively impact
sales, profits and cash flows. The Company believes that the formulation of
contingency plans will help mitigate exposure and losses should such a failure
occur. Such risks are further mitigated by the Company's diverse customer
base. However,

14
<PAGE>

because the Company's overall Year 2000 compliance is contingent upon the
readiness of its critical vendors and customers, there can be no assurance
that the Company's Year 2000 compliance programs will adequately address Year
2000 issues not under its direct control.

Inflation and Cyclicality

Although the Company cannot accurately anticipate the effect of inflation on
its operations, it does not believe that inflation has had, or is likely in
the foreseeable future to have, a material impact on its results of
operations. The Company's operating results may be adversely affected by
events or conditions in a particular region, such as regional economic,
weather and other factors. In addition, the Company's operating results may be
adversely affected by increases in interest rates that may lead to a decline
in economic activity, while simultaneously resulting in higher interest
payments by the Company under its variable rate credit facilities.

Although much of the Company's business is with customers in industries that
are cyclical in nature, management believes that certain characteristics of
the crane rental industry and the Company's operating strategies should help
to mitigate the effects of an economic downturn. These characteristics
include: (i) the flexibility and low cost offered to customers by renting,
which may be a more attractive alternative to capital purchases; (ii) the
Company's ability to relocate equipment during regional recessions; (iii) the
Company's high percentage of industrial customers who frequently rent cranes
for regularly scheduled, non-deferrable plant maintenance activities; and (iv)
the diversity of the Company's industry and customer base.

Competition

Certain of the Company's principal competitors are less leveraged than the
Company, may have greater financial resources and may be better able to
withstand market conditions within the crane rental industry. The Company
generally competes on the basis of, among other things: (i) quality and
breadth of service; (ii) expertise; (iii) reliability; and (iv) price. There
can be no assurance that the Company will not encounter increased competition
in the future, which could have a material adverse effect on the Company's
business, financial condition and results of operations.

Dependence on Key Personnel

The Company is dependent on the continued services of its senior management
team. Although the Company believes it could replace key employees in an
orderly fashion should the need arise, the loss of such key personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations.

Labor Relations

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, management's beliefs and assumptions made by

15
<PAGE>

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 and local sales
and use tax audit 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) 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.

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<PAGE>

ITEM 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
(1)Consolidated Financial Statements:

Report of Independent Accountants...................................... 18

Consolidated Balance Sheets--December 31, 1998 and 1997................ 19

Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996...................................... 20

Consolidated Statements of Partners' Capital (Deficit) for the
Years Ended December 31, 1998, 1997 and 1996.......................... 21

Consolidated Statements of Cash Flows for the
Years Ended December 31, 1998, 1997 and 1996.......................... 22

Notes to Consolidated Financial Statements............................. 23-38

(2)Supplementary Financial Data (Unaudited)............................... 38
</TABLE>

17
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Anthony Crane Rental Holdings, L.P.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, partners' capital (deficit) and cash
flows present fairly, in all material respects, the financial position of
Anthony Crane Rental Holdings, L.P. and subsidiaries (collectively, the
Partnership) as of December 31, 1998 and 1997, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles. These consolidated financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. We conducted our audits of these consolidated financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

As more fully discussed in Note 4 to the consolidated financial statements,
effective January 1, 1997, the Partnership revised its estimate of the salvage
values used for depreciating certain rental equipment. The effect of this
change was to decrease depreciation expense and increase net income for 1997
by approximately $5,650,000.

PricewaterhouseCoopers LLP

Pittsburgh, Pennsylvania
February 19, 1999, except for
Note 15, as to which the date
is March 23, 1999.

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<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

CONSOLIDATED BALANCE SHEETS
(In thousands)

<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,633 $ 4,375
Trade accounts receivable, net of allowance for doubtful
accounts of $1,500 and $1,840 in 1998 and 1997,
respectively............................................. 27,774 24,152
Receivable from sale of property (Note 4)................. -- 6,055
Other receivables (Note 7)................................ 2,192 2,596
Prepaid expenses and deposits............................. 1,382 1,560
-------- --------
Total current assets..................................... 36,981 38,738
Rental equipment, net of accumulated depreciation of
$94,240 and $82,322 in 1998 and 1997, respectively (Notes
4 and 6)................................................. 282,679 212,975
Property and equipment, net (Notes 4 and 5)............... 50,368 51,859
Intangible assets, net of accumulated amortization of
$3,191 and $2,661 in 1998 and 1997, respectively......... 3,334 1,865
Debt issuance costs, net of accumulated amortization of
$1,089 and $926 in 1998 and 1997, respectively........... 18,333 1,003
Other assets (Note 7)..................................... 497 488
-------- --------
$392,192 $306,928
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Cash overdraft............................................ $ 1,195 $ --
Accounts payable--trade (Note 7).......................... 7,890 8,603
Accrued interest.......................................... 9,216 2,530
Accrued wages and employee benefits....................... 2,258 1,730
Accrued taxes, other than income taxes.................... 4,430 3,669
Other accrued liabilities................................. 1,897 1,450
Current portion of long term debt (Note 6)................ -- 7,500
Current portion of obligation under capital lease (Note
8)....................................................... 94 94
-------- --------
Total current liabilities................................ 26,980 25,576
-------- --------
Long term debt, less current portion (Note 6)............... 379,561 177,500
Long-term obligation under capital lease (Note 8)........... 772 867
Other non-current liabilities............................... 1,684 1,569
-------- --------
Total liabilities........................................ 408,997 205,512
Commitments and contingencies (Notes 8 and 11)
Partners' capital (deficit):
Senior Preferred Units.................................... 22,500 --
Equity Investors Class L Common Units..................... 27,107 --
Equity Investors Class A Common Units..................... (10,279) --
Predecessor Partners Class L Common Units................. 807 --
Predecessor Partners Class A Common Units................. (53,049) 105,316
Accumulated other comprehensive income.................... 59 50
Related party receivables (Note 7)........................ (3,950) (3,950)
-------- --------
Total partners' capital (deficit)........................ (16,805) 101,416
-------- --------
Total liabilities and partners' capital (deficit)...... $392,192 $306,928
======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

19
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Equipment rentals (Note 7)..................... $183,684 $156,408 $128,161
Equipment sales................................ 22,975 27,400 19,444
-------- -------- --------
Total revenues............................... 206,659 183,808 147,605
-------- -------- --------
Cost of revenues:
Cost of equipment rentals (Note 7)............. 110,629 97,036 78,049
Cost of equipment sales........................ 18,920 15,541 13,643
-------- -------- --------
Total cost of revenues....................... 129,549 112,577 91,692
-------- -------- --------
Gross profit..................................... 77,110 71,231 55,913
Selling, general and administrative expenses..... 40,534 35,111 29,211
-------- -------- --------
Income from operations........................... 36,576 36,120 26,702
Interest expense................................. 27,738 13,962 10,873
Other income..................................... (104) (1,739) (69)
-------- -------- --------
Income before taxes and extraordinary item....... 8,942 23,897 15,898
Provision (benefit) for state taxes.............. 220 96 (102)
-------- -------- --------
Income before extraordinary item................. 8,722 23,801 16,000
-------- -------- --------
Extraordinary item (Note 3)...................... 15,811 -- --
-------- -------- --------
Net (loss) income................................ $(7,089) $ 23,801 $ 16,000
======== ======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements

20
<PAGE>

<TABLE>
<CAPTION>
Predecessor Partners
----------------------------------------
Equity Investor Equity Investor Accumulated
Class L Class A Class L Class A Other
Common Units Common Units Senior Common Units Common Units Comprehensive
Comprehensive ----------------- --------------- Preferred ------------- ---------------- Income
Income Shares Amount Shares Amount Units Shares Amount Shares Amount (Expense)
------------- ------- --------- ------ -------- --------- ------ ------ ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1995............ -- $ -- -- $ -- $ -- -- $ -- -- $ 83,947 $148
Partner
withdrawals..... -- -- -- -- -- -- -- -- (5,293) --
Comprehensive
income (loss):
Net (loss)
income......... $16,000 -- -- -- -- -- -- -- -- 16,000 --
Unrealized
investment gain
on securities... 9 -- -- -- -- -- -- -- -- -- 9
-------
Comprehensive
income (loss)... $16,009
======= ----- --------- ----- -------- ------- --- ---- --- --------- ----
Balance at
December 31,
1996............ -- -- -- -- -- -- -- -- 94,654 157
Partner
withdrawals..... -- -- -- -- -- -- -- -- (13,139) --
Comprehensive
income (loss):
Net (loss)
income......... $23,801 -- -- -- -- -- -- -- -- 23,801 --
Unrealized
investment loss
on securities... (107) -- -- -- -- -- -- -- -- -- (107)
-------
Comprehensive
income (loss)... $23,694
======= ----- --------- ----- -------- ------- --- ---- --- --------- ----
Balance at
December 31,
1997............ -- -- -- -- -- -- -- -- 105,316 50
Partner
withdrawals..... -- -- -- -- -- -- -- -- (13,891) --
Recapitalization
expenses........ -- (1,635) -- -- -- -- -- -- (6,886) --
Capital
contributions... 374 30,258 3,362 3,362 -- -- -- -- -- --
Partner
distributions
from
Recapitalization.. -- -- -- -- 22,500 82 -- 738 (144,849) --
Comprehensive
income (loss):
Net (loss)
income......... $(7,089) -- (1,516) -- (13,641) -- -- 807 -- 7,261 --
Unrealized
investment gain
on securities... 9 -- -- -- -- -- -- -- -- -- 9
-------
Comprehensive
income (loss)... $(7,080)
======= ----- --------- ----- -------- ------- --- ---- --- --------- ----
Balance at
December 31,
1998............ 374 $ 27,107 3,362 $(10,279) $22,500 82 $807 738 $ (53,049) $ 59
===== ========= ===== ======== ======= === ==== === ========= ====
<CAPTION>
Total
Related Partners'
Party Capital
Receivables (Deficit)
----------- ----------
<S> <C> <C>
Balance at
December 31,
1995............ $(3,950) $ 80,145
Partner
withdrawals..... -- (5,293)
Comprehensive
income (loss):
Net (loss)
income......... -- 16,000
Unrealized
investment gain
on securities... -- 9
Comprehensive
income (loss)...
----------- ----------
Balance at
December 31,
1996............ (3,950) 90,861
Partner
withdrawals..... -- (13,139)
Comprehensive
income (loss):
Net (loss)
income......... -- 23,801
Unrealized
investment loss
on securities... -- (107)
Comprehensive
income (loss)...
----------- ----------
Balance at
December 31,
1997............ (3,950) 101,416
Partner
withdrawals..... -- (13,891)
Recapitalization
expenses........ -- (8,521)
Capital
contributions... -- 33,620
Partner
distributions
from
Recapitalization.. -- (122,349)
Comprehensive
income (loss):
Net (loss)
income......... -- (7,089)
Unrealized
investment gain
on securities... -- 9
Comprehensive
income (loss)...
----------- ----------
Balance at
December 31,
1998............ $(3,950) $ (16,805)
=========== ==========

</TABLE>

21
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income.............................. $ (7,089) $ 23,801 $ 16,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 26,785 21,905 22,060
Amortization of discount on debentures....... 1,517 -- --
Amortization of debt issuance costs.......... 1,320 359 242
Net (gains) on used rental equipment sales... (2,804) (10,659) (3,926)
Net (gains) losses on other asset
dispositions................................ (146) (1,657) 29
Provision for bad debts...................... 475 428 1,071
Deferred income tax provision (benefit)...... 220 96 (102)
Extraordinary item--loss on early
extinguishment of debt...................... 15,811 -- --
Increase (decrease) in cash from changes in:
Trade accounts receivable.................... (3,883) (4,709) (4,304)
Other receivables............................ 404 (2,011) (571)
Prepaid expenses and deposits................ 178 (298) 670
Other non-current assets..................... -- 39 --
Accounts payable--trade...................... (6,063) (447) 803
Accrued interest............................. 6,686 577 278
Accrued wages and employee benefits.......... 514 182 664
Accrued taxes, other than income taxes....... 761 2,642 (627)
Other accrued liabilities.................... 447 449 124
--------- -------- --------
Net cash provided by operating activities.. 35,133 30,697 32,411
--------- -------- --------
Cash flows from investing activities:
Cash paid for business acquisitions............ (2,936) (4,050) (7,825)
Proceeds from sale/leaseback transaction....... -- -- 24,162
Proceeds from sale of fixed assets, including
rental equipment.............................. 14,424 22,532 8,338
Proceeds from sale of property................. 6,055 -- --
Capital expenditures........................... (102,526) (85,641) (81,195)
Repayment of related party loans, net.......... -- -- 319
Other.......................................... (106) 183 (148)
--------- -------- --------
Net cash used in investing activities...... (85,089) (66,976) (56,349)
--------- -------- --------
Cash flows from financing activities:
Cash overdraft................................. 1,195 -- --
Proceeds from issuance of debt................. 408,044 108,000 56,500
Payments on debt............................... (215,000) (63,000) (24,500)
Extinguishment of debt from business
acquisitions.................................. (684) -- --
Payments under capital leases.................. (95) (74) --
Expenditures for debt issuance costs and other
intangibles................................... (19,618) (1,147) (337)
Proceeds of Recapitalization transaction, net
of recapitalization expenses of $1,635........ 31,985 -- --
Prepayment penalties as a result of early
extinguishment of debt........................ (15,076) -- --
Partner withdrawals, including
recapitalization expenses..................... (139,537) (11,713) (5,293)
--------- -------- --------
Net cash provided by financing activities.. 51,214 32,066 26,370
--------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................... 1,258 (4,213) 2,432
Cash and cash equivalents, beginning of year.... 4,375 8,588 6,156
--------- -------- --------
Cash and cash equivalents, end of year.......... $ 5,633 $ 4,375 $ 8,588
========= ======== ========
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest....... $ 19,535 $ 13,026 $ 10,353
========= ======== ========
Noncash investing and financing activities:
Assets acquired under capital lease
obligations................................... -- $ 1,035 --
========= ======== ========
Expenditures for rental equipment purchases
included in accounts payable.................. $ 5,205 $ 5,491 $ 1,478
========= ======== ========
Receivable from sale of property............... -- $ 6,055 --
========= ======== ========
Noncash partner withdrawals.................... $ 3,589 $ 1,426 --
========= ======== ========
Distribution of Senior Preferred Units......... $ 22,500 -- --
========= ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

22
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

1. Description of Business

Anthony Crane Rental, L.P. (the "Company"), its subsidiaries and, effective
July 22, 1998, its parent, Anthony Crane Rental Holdings, L.P. ("Holdings")
(collectively, the Partnership) 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, utility, 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. Effective July 22, 1998, as part of the
Company's Recapitalization (see Note 3), the Company became 99% directly-owned
by Holdings (a former subsidiary of the Company which has no current
operations other than through the Company).

2. Basis of Presentation

The 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.

Prior to the Recapitalization of the Partnership on July 22, 1998 (see Note
3), the partners of the Partnership consisted of Anthony Crane Rental, Inc.,
as general partner; and ACR Acquisitions, Inc., Anthony Crane Rental of
Georgia, Inc., Anthony Crane Rental of Texas, Inc. and Anthony Iron and Metal
Company, as limited partners (collectively referred to hereafter as the
"Predecessor Partners"). All of these entities are under common control of Ray
G. Anthony (Mr. Anthony). Effective with the Recapitalization, the partners of
the Partnership now include the Predecessor Partners who have retained an 18%
interest in the Partnership and the Equity Investors (as defined in Note 3),
who collectively hold an 82% interest in the Partnership.

In addition, Mr. Anthony has a majority ownership interest in organizations
that engage in steel erection and installation (Century Steel Erectors, Inc.);
inspect, repair and manufacture overhead cranes (Century Crane and Hoist,
Inc.); rent cranes to mining operations (Republic Crane Rental, Inc.); and
sell motorcycles and service (Dallas Corporation). Mr. Anthony also owned a
fifty percent interest in Steel City Environmental Services, Inc., which
provides environmental remediation and transportation services to the steel
and petrochemical industries; Crane and Rigging Consultants, Inc., a lift
consulting company; and A & D Tower, Inc., a communications company, which is
a passive investment with no personal management control by Mr. Anthony. These
companies are not included in these consolidated financial statements.

Partnership Agreement

The term of the Partnership, which was amended and restated July 22, 1998,
expires December 31, 2080; however, dissolution will occur earlier in the
event of the sale of substantially all of the Partnership's assets or a
disabling event as described in the Partnership Agreement. Partners may not
sell, assign, transfer or convey all or any portion of their interest in the
Partnership without the consent of the general partner, or as specifically
defined in the Partnership Agreement.

3. Recapitalization

On June 1, 1998, the Partnership entered into a recapitalization agreement
with Bain/ACR, L.L.C. (Bain), pursuant to which Bain and certain members of
senior management of the Partnership (collectively the "Equity Investors")
indirectly acquired through Holdings an 82% ownership interest in the
Partnership (the "Recapitalization"). Effective July 22, 1998, the
Recapitalization was consummated and the Partnership

23
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

incurred new debt obligations, repaid its outstanding Senior Notes and Credit
Agreement obligations (see Note 6), restructured certain of its outstanding
Partnership interests and distributed approximately $122.3 million in cash and
property with a net book value of approximately $3.6 million to the Predecessor
Partners. In connection with the repayment of its outstanding debt obligations,
the Partnership incurred approximately $15.1 million in prepayment penalties
and wrote-off deferred financing costs of approximately $0.8 million which have
been reflected as an extraordinary item in the consolidated statement of
operations for the year ended December 31, 1998.

The Recapitalization was funded by: (i) a notes offering by the Company with
gross proceeds of $155 million, (ii) a discount debentures offering by Holdings
with proceeds of $25 million, (iii) a $33.6 million contribution by the Equity
Investors, (iv) $125 million of borrowings by the Company under a revolving
credit facility of a new senior credit facility and (v) $50 million of
borrowings by the Company under the term loan facility of a new senior credit
facility. In addition, as part of the Recapitalization consideration, Holdings
distributed $22.5 million of Senior Preferred Units to the Predecessor
Partners.

The Recapitalization Agreement provided for an adjustment of the distribution
made to the Predecessor Partners based on consolidated net worth (as defined in
the Recapitalization Agreement), as of the closing date. The amount of the
adjustment has not yet been determined. Of the total distribution made to the
Predecessor Partners, $4 million is being maintained in an escrow account in
connection with resolution of the final adjustment and certain indemnification
provisions for the benefit of the Company pursuant to the Recapitalization
Agreement. As of December 31, 1998, the Company believes that the adjustments
should result in a reimbursement of approximately $4.7 million plus interest at
the rate of 8% per annum from the date of closing of the total distribution
made to the Predecessor Partners. The Predecessor Partners contend that they
are entitled to approximately $271 in addition to the $4 million being
maintained in the escrow account plus interest at the rate of 8% per annum from
the closing date.

4. Summary of Significant Accounting Policies

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Partnership
considers all highly liquid investments purchased with original maturities of
90 days or less to be cash equivalents.

Cash overdraft represents outstanding checks in excess of related bank
balances.

Investment Securities

Investment securities, included in other assets, are classified as available
for sale and are recorded at the aggregate fair market value determined at the
consolidated balance sheet dates. Gross unrealized investment gains/losses are
included as a separate component of partners' capital.

Rental Equipment and Property and Equipment

Rental equipment and property and equipment are stated at cost less
accumulated depreciation.

24
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

Major renewals and improvements are charged to the property and equipment
accounts, while replacements, maintenance and repairs which do not improve or
extend the useful lives of the respective assets are expensed. Upon
disposition or retirement of property and equipment, the cost and the related
accumulated depreciation are removed from the accounts and any gain or loss is
recorded in results of operations. Depreciation of rental equipment and
property and equipment is computed using the straight-line method based on the
estimated useful lives of the assets.

Effective January 1, 1997, the Partnership revised its estimate of the
salvage values used for depreciating certain rental equipment, principally
cranes, to amounts ranging from 15% to 35%. Prior to 1997, the Partnership
depreciated this rental equipment over their estimated useful lives with no
salvage value. The Partnership believes this change in estimated salvage
values more appropriately allocates the costs of this rental equipment over
their estimated useful lives. The effect of this change was to decrease
depreciation expense and increase net income for 1997 by approximately $5,650.
All other rental equipment and property and equipment will continue to be
depreciated with no salvage value.

The useful lives of rental equipment and property and equipment are as
follows:

<TABLE>
<CAPTION>
Life
in Years
--------
<S> <C>
Rental equipment:
Cranes, lifts and other heavy equipment........................... 8-12.5
Property and equipment:
Buildings and improvements........................................ 5-30
Motor vehicles and trailers....................................... 3-8
Aircraft.......................................................... 15
Machinery and tools............................................... 3-8
Furniture, fixtures and office equipment.......................... 5-10
</TABLE>

Intangible Assets

Intangible assets consist of noncompetition agreements, customer lists,
trade names and goodwill related to various business acquisitions. These
assets are being amortized using the straight-line method over periods ranging
from 2 to 20 years. The Partnership periodically reviews the carrying value of
intangible assets and will recognize impairments when the expected future
operating cash flow derived from such intangible assets is less than their
carrying value.

Revenue Recognition

The Partnership rents equipment to commercial, industrial and government
customers by the day, month and longer terms. Revenue from equipment rentals
is earned over the corresponding rental period. In addition, the Partnership
generates revenue from equipment sales. Revenue from the sale of equipment is
recognized upon the execution of a sales agreement and delivery of the
equipment.

Other Income

Included in other income for 1997 is approximately $1.4 million related to a
net gain on property sold by the Partnership.

25
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

Income Taxes

The partners included in the accompanying consolidated financial statements
have elected to be treated as either an S-corporation or a partnership for
federal income tax purposes.

Similar elections are made, where possible, for state income tax purposes.
Accordingly, all federal and certain state (except for Texas) income tax
liabilities are borne by the partners and, thus, are not reflected in the
accompanying consolidated financial statements.

Deferred income tax assets and liabilities are provided for state income tax
purposes for the temporary differences between the tax basis of assets and
liabilities and the financial reporting basis using enacted tax rates in
effect in the years in which these differences are expected to reverse. These
differences principally relate to depreciation and the reporting for certain
revenues and expenses.

Concentration of Credit Risk

Financial instruments which potentially subject the Partnership to
significant concentrations of credit risk consist primarily of cash and
accounts receivable. Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of entities comprising
the Partnership's customer base and their geographic dispersion. The
Partnership generally does not require collateral on accounts receivable. As
of December 31, 1998 and 1997, the Partnership had no significant
concentrations of credit risk.

The Partnership maintains cash and cash equivalents with a limited number of
financial institutions located throughout the country in order to limit
exposure. No collateral or other security is provided on these deposits, other
than $100 of deposits insured by the Federal Deposit Insurance Corporation.
The Partnership's periodic evaluations of the relative credit standing of
these financial institutions are considered in the Partnership's business
strategy.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and
displaying comprehensive income and its components. This Statement requires
that all items that are required to be recognized under accounting standards
as components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements. The
provisions of SFAS No. 130 have been adopted in the year ended December 31,
1998, and all years presented have been adjusted to reflect the adoption. In
the Partnership's case, comprehensive income includes net income and
unrealized investment gains and losses on securities.

The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," which establishes standards for the way that public
business enterprises report information about operating

26
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

segments in annual financial statements and related disclosures about products
and services, geographic areas and major customers. Management has evaluated
the impact of this standard on the consolidated financial statements and
determined that the standard has no impact on the consolidated financial
statements.

The FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and
other Post-retirement Benefits," which revises employers' disclosures about
pension and other post-retirement benefit plans by standardizing the
disclosure requirements for pensions and other post-retirement benefits to the
extent practicable, requiring additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminating certain disclosures that are no longer as useful.
The provisions of SFAS No. 132 have been adopted in the year ended December
31, 1998, and have not had a significant impact on the Company's employee
benefit plan disclosures.

The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", which establishes accounting and reporting standards for
derivatives and hedging activities. The pronouncement is effective for fiscal
quarters of fiscal years beginning after June 15, 1999. Management has
evaluated the impact of this standard on the consolidated financial
statements, and determined that the standard currently will have no impact on
the consolidated financial statements upon adoption.

5. Property and Equipment

Property and equipment consist of the following as of December 31:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Land..................................................... $ 10,005 $ 8,438
Buildings and improvements............................... 15,852 14,898
Motor vehicles and trailers.............................. 31,414 29,986
Aircraft................................................. -- 1,889
Machinery and tools...................................... 4,090 3,562
Furniture, fixtures and office equipment................. 2,896 2,685
Spare equipment parts.................................... 4,615 5,016
-------- --------
68,872 66,474
Less accumulated depreciation and amortization........... (18,504) (14,615)
-------- --------
$ 50,368 $ 51,859
======== ========
</TABLE>

Depreciation expense for rental equipment and property and equipment was
approximately $26,206, $21,405, and $21,662 in 1998, 1997 and 1996,
respectively.

27
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

6. Long-Term Debt

Long-term debt consists of the following as of December 31:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
8.5% Series A Senior Notes $20 million, due 2001 (A).. $ -- $ 16,000
8.9% Series B Senior Notes $40 million, due 2006 (A).. -- 40,000
8.9% Series C Senior Notes $22.5 million, due 2004
(A).................................................. -- 22,500
9.5% Series D Senior Notes $36.5 million, due 2009
(A).................................................. -- 36,500
Credit Agreement--Banks Prime Rate (A)................ -- 10,000
Credit Agreement--LIBO (A)............................ -- 60,000
10 3/8% Company Senior Notes, due 2008 (B)............ 155,000 --
13 3/8% Holdings Senior Discount Debentures, due 2009
(C).................................................. 26,561(1) --
Senior Credit Facility of the Company (D)
Revolving Credit Facility........................... 148,000 --
Term Loan........................................... 50,000 --
-------- --------
379,561 185,000
Less current portion of long-term debt................ -- 7,500
-------- --------
$379,561 $177,500
======== ========
</TABLE>
- --------
(1) Net of unamortized discount on debentures of $21,439 at December 31,
1998.

(A) As of December 31, 1997, the Company had $115 million outstanding of
Senior Notes and $70 million outstanding under a Revolving Credit
Agreement. The Senior Notes were issued to various insurance companies
and had due dates ranging between 2001 and 2009. The Revolving Credit
Agreement included a maximum combined commitment of $110 million from two
separate institutions. During 1998, the Company entered into a
Recapitalization (refer to Note 3) and retired the Senior Notes and the
Revolving Credit Agreement. Concurrent with the Recapitalization, the
Company issued $155 million of Senior Notes, $48 million of Discount
Debentures, and entered into a Revolving Credit Facility with a maximum
commitment of $275 million.

(B) The Senior Notes of $155 million were issued in connection with the
Recapitalization (see Note 3) 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. Not withstanding the foregoing, at
any time prior to August 1, 2001, the Company may on any one or more
occasions redeem 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.

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.

28
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

(C) The Discount Debentures of $48 million were offered at an original issue
discount of approximately $23 million. Interest on the Discount Debentures
accretes at a rate of 13 3/8% per annum, compounded semi-annually to an
aggregate principal amount of $48 million on August 1, 2003. Thereafter,
interest on the Discount Debentures will accrue at the rate of 13 3/8% per
annum and will be paid semi-annually until the maturity date of August 1,
2009.

The Discount Debentures are general unsecured obligations of Holdings. The
Discount Debentures, however, are effectively subordinated indebtedness to
all secured obligations of Holdings and all obligations of Holdings'
subsidiaries, including borrowings under the Senior Notes and the Senior
Credit Facilities.

The Discount Debentures are not redeemable prior to August 1, 2003.
Thereafter, the Discount Debentures may be redeemed by the Company at
premium percentages ranging between approximately 107% 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 Discount Debentures may
be redeemed at no premium to the Company. Not withstanding the foregoing,
at any time prior to August 1, 2001, the Company may on any one or more
occasions redeem a total of up to 35% of the aggregate principal amount of
the Discount Debentures originally issued under the Discount Debenture
Indenture at a redemption price of approximately 113 3/8% of the accreted
value, plus liquidated damages, if that redemption is paid for with the
proceeds of an equity offering.

The Discount Debenture 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.

(D) The Senior Credit Facilities consist of a $275.0 million six-year non-
amortizing Revolving Credit Facility and a $50.0 million eight-year non-
amortizing 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 1.25%, subject to adjustment
based on a leverage test, or (ii) the reserve-adjusted London Interbank
Offered Rate ("LIBO") plus a margin of 2.25%, 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 1.75%, or (ii) the reserve-
adjusted LIBO rate plus a margin of 2.75%. On December 31, 1998, the
Company had loans outstanding with interest rates ranging from 7.28% to
8.46%.

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 Revolving Credit Facility is 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

29
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

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 LIBO 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.

The aggregate principal debt maturities of long-term debt for the next five
years are as follows:

<TABLE>
<S> <C>
1999................................................................ $ --
2000................................................................ --
2001................................................................ --
2002................................................................ --
2003................................................................ --
Thereafter.......................................................... 379,561
--------
$379,561
========
</TABLE>

7. Related Party Transactions

The Partnership periodically rents and sells equipment to affiliated
companies. Rental revenues from such transactions totaled $498, $682 and $423
and gross proceeds from equipment sales totaled $670, $119 and $45 in 1998,
1997 and 1996, respectively. In addition, the Partnership rents equipment,
utilizes personnel, and purchases equipment from affiliated companies.
Expenses from such transactions totaled $351, $652, and $198 in 1998, 1997 and
1996, respectively, and purchases of equipment totaled $79, $218 and $50 in
1998, 1997 and 1996, respectively. In addition, subsequent to the
Recapitalization, the Partnership also reimburses Mr. Anthony for the
Partnership's use of his personal airplanes. Such reimbursement totaled $234
in 1998.

30
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

The following is a summary of amounts due from/to related parties as of
December 31, 1998 and 1997, exclusive of amounts classified as a reduction of
partners' capital:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Due from:
Century Steel Erectors, Inc. (CSE).............................. $ 20 $115
Steel City Environmental Service, Inc. (SCE).................... -- 26
Lindsay Crane................................................... -- 28
Insurance Salvors............................................... 29 19
---- ----
$ 49 $188
---- ----
Equipment sales receivable from:
Century Steel Erectors.......................................... $490 $ --
---- ----
Long-term notes receivable from:
SCE............................................................. 300 300
Century Crane and Hoist, Inc.................................... 75 81
---- ----
$375 $381
---- ----
Due to:
Lindsay Crane................................................... -- 13
Ray G. Anthony.................................................. 3 --
---- ----
$ 3 $ 13
==== ====
</TABLE>

The Partnership periodically has made advances to Mr. Anthony. Such
advances, which totaled $3,950 at December 31, 1998 and 1997, have no specific
repayment terms and have been classified as a reduction of partners' capital
in the accompanying consolidated balance sheets. For federal income tax
purposes, the advances are treated as distributions to Anthony Iron and Metal
Company. In addition, during 1997, advances and other receivables due from Mr.
Anthony totaling $806 were charged to the partners' capital account.

In accordance with a management services agreement entered into with Bain
Capital, Inc. (Bain Capital), which provides for an annual fee of $1 million,
the Partnership paid approximately $463 in management fees to Bain Capital in
1998.

In addition, the Partnership purchased the net assets of an entity owned by
a related party for a purchase price of $1.9 million (refer to Note 9) in
1998.

8. Lease Commitments

The Partnership leases various pieces of equipment under long-term operating
lease agreements with third parties.

In addition, during December 1996, the Partnership entered into an agreement
for the sale and leaseback of certain cranes, lifts and other heavy equipment.
The Partnership has purchase and lease renewal options at future fair market
values under the agreement. The lease is classified as an operating lease in
accordance with SFAS No. 13, "Accounting for Leases." The net book value of
the equipment totaling approximately $24 million has been removed from the
accompanying consolidated balance sheets. There was no gain or loss on the
transaction. Rentals under this agreement approximate $3,141 annually through
January 2004.

31
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

The approximate future minimum lease payments under these agreements are as
follows:

<TABLE>
<S> <C>
Year ending December 31:
1999................................................................ $4,744
2000................................................................ 4,744
2001................................................................ 4,744
2002................................................................ 4,744
2003................................................................ 3,942
</TABLE>

Total rental expense for all leases, including the related party rentals
discussed in Note 7, approximated $4,950, $5,230 and $1,767 in 1998, 1997 and
1996, respectively.

In April 1997, the Partnership entered into a capital lease agreement for
the lease of twenty trucks. The lease has a term of three years with a bargain
purchase option at the end of the lease agreement. Interest rates under the
capital lease agreement range from approximately 19% to 22%.

The following is a schedule of future minimum lease payments under the
capital lease agreement together with the present value of the net minimum
lease payments as of December 31, 1998:

<TABLE>
<S> <C>
Year ending December 31:
1999............................................................... $ 287
2000............................................................... 806
------
Total minimum lease payments......................................... 1,093
Less amount representing interest.................................... 227
------
Present value of minimum lease payments.............................. 866
Less current portion................................................. 94
------
$ 772
======
</TABLE>

Included in rental equipment is cost and accumulated depreciation for these
leased trucks of approximately $1,035 and $215, respectively, at December 31,
1998 and $1,035 and $86, respectively, at December 31, 1997.

9. Business Acquisitions

In 1998 and 1997, the Partnership entered into various purchase agreements
to acquire certain tangible and intangible assets. The total purchase price
for the acquisitions was $2,936 and $4,050 for 1998 and 1997, respectively. In
1998, one of these acquisitions was from a related party (refer to Note 7).
These acquisitions were accounted for under the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets
acquired, principally consisting of equipment, based on their estimated fair
values at the date of acquisition.

The operating results of these acquisitions were included in the
Partnership's consolidated results of operations from the date of acquisition.
Certain required pro forma financial information related to the above
acquisitions has not been presented since the acquisitions were not material
to the Partnership's consolidated financial position or its consolidated
results of operations.

32
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

10. Employee Benefit Plans

The Partnership has a profit-sharing defined contribution pension plan for
all affiliated companies. The plan covers all non-union employees of the
Partnership. The contribution to the plan is an amount determined by the
Partnership. The contribution for 1998, 1997 and 1996 was one percent of the
eligible participant's compensation.

The plan also includes a 401(k) savings plan feature that enables employees
to make voluntary salary reduction contributions up to 15% of eligible
compensation to the plan. The Partnership will match fifty percent of the
contributions, up to six percent of the participant's compensation.

The Partnership's total expense for the profit-sharing and 401(k) savings
plans was approximately $680, $583, and $380 in 1998, 1997 and 1996,
respectively.

Union employees of the Partnership are covered by various union-sponsored,
collectively bargained, benefit plans. The Partnership's contributions to
these multi-employer plans are based on specified amounts per hours worked by
the covered union employees. One such plan is underfunded and the unfunded
amount is being funded through ongoing contributions by all sponsoring
companies. Under certain circumstances, the Partnership may have to accelerate
such funding. In 1997, the Partnership paid approximately $600 towards its
share of the underfunded plan. Union employees receive union-sponsored
benefits such as pension benefits, health and welfare benefits, annuity
benefits, industry advancement and apprentice training. The total cost of
these union benefits approximated $6,877, $6,162 and $4,339 in 1998, 1997 and
1996, respectively.

The Partnership also had a deferred compensation plan for certain eligible
employees and members of the board of advisors. The participants were credited
with one percent of after-tax income annually and vested in annual
contributions if employed at year-end. The Partnership had purchased insurance
contracts to satisfy all future liabilities relating to the Plan. The
Partnership's expense for the deferred compensation plan for 1998, 1997, and
1996 was approximately $631, $250, and $340, respectively. This deferred
compensation plan was terminated upon completion of the Recapitalization (see
Note 3).

11. Contingencies

The Company is the defendant in a lawsuit by its former insurance carrier
who has asserted a claim for premiums allegedly due on a contract of insurance
in the amount of approximately $455. The Company has denied any liability and
intends to vigorously defend the claim.

The Company is a party to a number of other 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
Predecessor Partners.

33
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

The Partnership is currently investigating soil and groundwater
contamination at its Savannah, Georgia location from underground storage tanks
removed in 1994. Clean up activities associated with the contamination are
covered under the Georgia Underground Storage Tank Trust Fund (GUST). While
the ultimate costs of any remediation or continued monitoring are not yet
known, the Partnership expects that it will receive reimbursement for such
costs from the GUST. The reimbursement limit under GUST is $1 million. The
Partnership believes that it is unlikely that its costs will exceed the
reimbursement limit.

The Company has received a proposed assessment from a local taxing authority
in the amount of $8.6 million, including interest and penalties of $1.9
million and $1.3 million, respectively, as a result of a state and local sales
and use tax audit. Upon review of the assessment, management has identified a
significant amount that it believes was calculated by assessing duplicate tax
on specific cranes. The Company has recorded a liability of approximately $3.2
million at December 31, 1998 for such tax liabilities. Management is presently
negotiating its liability with the respective local taxing authority and
believes there is a reasonable possibility that the final tax assessment may
exceed the amount presently recorded.

12. Disclosures about the Fair Value of Financial Instruments

The carrying values and fair values of the Company's financial instruments
at December 31 consisted of:

<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 5,633 $ 5,633 $ 4,375 $ 4,375
Trade accounts receivable.............. 27,774 27,774 24,152 24,152
Trade accounts payable................. 7,890 7,890 8,603 8,603
Long-term debt, including current
portion............................... 379,561 368,563 185,000 185,000
</TABLE>

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

Cash and cash equivalents: The carrying amounts approximate fair value
because of the short maturity of these investments.

Accounts receivable and accounts payable: The fair value of receivables and
payables is based on anticipated cash flows and approximates carrying value.

Long-term debt: The fair value of long-term debt is based on interest rates
that are currently available to the Company for issuance of debt with similar
terms and remaining maturities.

13. Subsidiary Guarantors

All of the Company's subsidiaries are wholly owned and all of the
outstanding debt under the Company's new 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, results of
operations and cash flows for Holdings, the Company and Guarantor Subsidiaries
as of December 31, 1998 and 1997 and for each of the three years in the
periods ended December 31, 1998, 1997 and 1996. Separate financial statements
of the Guarantor Subsidiaries have not been presented because management
believes they are not material to investors. In connection with the
Recapitalization (see Note 3), Holdings created a wholly-owned subsidiary,
Anthony Crane Holdings Capital Corporation (AC Holdings Corp.), for the sole
purpose of serving as co-issuer of the Senior Discount Debentures. AC Holdings
Corp. does not have any operations or assets of any kind and will not have any
revenues. As a result, no separate disclosure of AC Holdings Corp.'s financial
information has been provided as such disclosure would not be meaningful given
AC Holdings Corp.'s lack of operations and assets.

34
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

The following table summarizes the financial position, results of operations
and cash flows for Holdings, the Company and the Company's guarantor
subsidiaries as of and for the year ended December 31, 1998:

<TABLE>
<CAPTION>
December 31, 1998
-----------------------------------------------------------
Operating Guarantor Interco.
Holdings Company Subsidiaries Eliminations Consolidated
-------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Assets:
Total current assets.... -- $ 38,480 $ 1,861 $ (3,360) $ 36,981
Investment in
subsidiaries........... $ 80,714 9,052 -- (89,766) --
Rental equipment, net of
accumulated
depreciation........... -- 272,309 10,370 -- 282,679
Property and equipment,
net of accumulated
depreciation........... -- 48,704 1,664 -- 50,368
Other assets, net....... 1,532 20,516 116 -- 22,164
-------- -------- ------- -------- --------
Total assets.......... $ 82,246 $389,061 $14,011 $(93,126) $392,192
======== ======== ======= ======== ========

Liabilities and
partners' capital:
Total current
liabilities............ -- $ 25,381 $ 4,959 $ (3,360) $ 26,980
Long term debt, less
current portion........ 26,561 353,000 -- -- 379,561
Other non-current
liabilities............ -- 2,456 -- -- 2,456
-------- -------- ------- -------- --------
Total liabilities..... 26,561 380,837 4,959 (3,360) 408,997
Partners' capital
(deficit).............. 55,685 8,224 9,052 (89,766) (16,805)
-------- -------- ------- -------- --------
Total liabilities and
partners' capital
(deficit)............ $ 82,246 $389,061 $14,011 $(93,126) $392,192
======== ======== ======= ======== ========
STATEMENT OF OPERATIONS
Total revenues.......... -- $195,713 $10,946 -- $206,659
-------- -------- ------- -------- --------
Total cost of revenues.. -- 124,853 4,696 -- 129,549
Selling, general and
administrative......... -- 38,632 1,902 -- 40,534
-------- -------- ------- -------- --------
Income from operations.. -- 32,228 4,348 -- 36,576
Interest expense and
other income, net...... $ 1,577 25,160 897 -- 27,634
-------- -------- ------- -------- --------
Income (loss) before
taxes and extraordinary
items.................. (1,577) 7,068 3,451 -- 8,942
Provision for state
taxes.................. -- 220 -- -- 220
-------- -------- ------- -------- --------
Income (loss) before
extraordinary items.... (1,577) 6,848 3,451 -- 8,722
Extraordinary item...... -- 15,811 -- -- 15,811
-------- -------- ------- -------- --------
Net income (loss)....... $ (1,577) $ (8,963) $ 3,451 -- $ (7,089)
======== ======== ======= ======== ========

STATEMENT OF CASH FLOWS
Net cash provided by
operating activities... -- $ 29,672 $ 5,461 -- $ 35,133
-------- -------- ------- -------- --------
Net cash used in
investing activities... $(80,714) $(79,367) $(5,722) $ 80,714 $(85,089)
-------- -------- ------- -------- --------
Net cash provided by
financing activities... $ 80,714 $ 51,214 -- $(80,714) $ 51,214
-------- -------- ------- -------- --------
</TABLE>

35
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

The following table summarizes the financial position, results of operations
and cash flows for the Company and its guarantor subsidiaries as of and for the
year ended December 31, 1997:

<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------------
Operating Guarantor Intercompany
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE SHEET
Assets:
Total current assets........ $ 42,260 $ 1,747 $ (5,269) $ 38,738
Investment in subsidiaries.. 5,602 -- (5,602) --
Rental equipment, net of
accumulated depreciation... 205,412 7,563 -- 212,975
Property and equipment, net
of accumulated
depreciation............... 50,320 1,539 -- 51,859
Other assets, net........... 3,194 162 -- 3,356
-------- ------- -------- --------
Total assets.............. $306,788 $11,011 $(10,871) $306,928
======== ======= ======== ========

Liabilities and partners'
capital (deficit):
Total current liabilities... $ 25,436 $ 5,409 $ (5,269) $ 25,576
Long term debt, less current
portion.................... 177,500 -- -- 177,500
Other non-current
liabilities................ 2,436 -- -- 2,436
-------- ------- -------- --------
Total liabilities......... 205,372 5,409 (5,269) 205,512
Partners' capital........... 101,416 5,602 (5,602) 101,416
-------- ------- -------- --------
Total liabilities and
partners' capital........ $306,788 $11,011 $(10,871) $306,928
======== ======= ======== ========
STATEMENT OF OPERATIONS
Total revenues.............. $173,385 $10,423 -- $183,808
-------- ------- -------- --------
Total cost of revenues...... 107,689 4,888 -- 112,577
Selling, general and
administrative............. 33,067 2,044 -- 35,111
-------- ------- -------- --------
Income from operations...... 32,629 3,491 -- 36,120
Interest expense and other
income, net................ 11,683 540 -- 12,223
-------- ------- -------- --------
Income before taxes and
extraordinary items........ 20,946 2,951 -- 23,897
Provision for state taxes... 96 -- -- 96
-------- ------- -------- --------
Income before extraordinary
items...................... 20,850 2,951 -- 23,801
Extraordinary item.......... -- -- -- --
-------- ------- -------- --------
Net income.................. $ 20,850 $ 2,951 -- $ 23,801
======== ======= ======== ========

STATEMENT OF CASH FLOWS
Net cash provided by
operating activities....... $ 29,399 $ 1,298 -- $ 30,697
-------- ------- -------- --------
Net cash used in investing
activities................. $(66,632) $ (344) -- $(66,976)
-------- ------- -------- --------
Net cash provided by
financing activities....... $ 32,066 -- -- $ 32,066
-------- ------- -------- --------
</TABLE>

36
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

The following table summarizes results of operations and cash flows for the
Company and its guarantor subsidiaries as of and for the year ended December
31, 1996:

<TABLE>
<CAPTION>
December 31, 1996
-------------------------------------------------
Operating Guarantor Intercompany
Company Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Total revenues.............. $141,344 $ 6,261 -- $147,605
-------- ------- ---- --------
Total cost of revenues...... 88,890 2,802 -- 91,692
Selling, general and
administrative............. 28,403 808 -- 29,211
-------- ------- ---- --------
Income from operations...... 24,051 2,651 -- 26,702
Interest expense and other
income, net................ 10,804 -- -- 10,804
-------- ------- ---- --------
Income before taxes and
extraordinary items........ 13,247 2,651 -- 15,898
Provision for state taxes... (102) -- -- (102)
-------- ------- ---- --------
Income before extraordinary
items...................... 13,349 2,651 -- 16,000
Extraordinary item.......... -- -- -- --
-------- ------- ---- --------
Net income.................. $ 13,349 $ 2,651 -- $ 16,000
======== ======= ==== ========

STATEMENT OF CASH FLOWS
Net cash provided by
operating activities....... $ 30,488 $ 1,923 -- $ 32,411
-------- ------- ---- --------
Net cash used in investing
activities................. $(54,946) $(1,403) -- $(56,349)
-------- ------- ---- --------
Net cash provided by (used
in) financing activities... $ 26,602 $ (232) -- $ 26,370
-------- ------- ---- --------
</TABLE>

14. Equity-Preferred and Common Units

Preferred and Common Units

The Company has three classes of stock: (i) Class A Preferred (ii) Class L
Common (iii) Class A Common. Upon liquidation or distribution of capital, the
Class A Preferred Unitholders are entitled to receive a preferential
distribution on payment of dividends equal to an 11% annual return, compounded
quarterly, on their original investment of $22.5 million. In addition, the
Class A Preferred Unitholders have a liquidation preference of their original
investment prior to any dividends or distributions made to Class L or Class A
Common Unitholders. As of December 31, 1998, the cumulative preferred dividend
was approximately $1,099.

Upon satisfaction of Class A Preferred cumulative dividend and the
liquidation preference of the original investment of the Preferred
Unitholders, the Class L Common Unitholders are entitled to receive a
preferential distribution on payment of dividends equal to an 12% annual
return, compounded quarterly, on their original investment of $36.9 million.
In addition, the Class L Common Unitholders have a liquidation preference of
their original investment prior to any dividends or distributions to the Class
A Common Unitholders. As of December 31, 1998, the cumulative preferred
dividend was approximately $1,968.

Upon satisfaction of the aggregate liquidation preference of both Class A
Preferred and Class L Common Unitholders, any remaining distributions will be
distributed ratably among the Class L and Class A Common Unitholders.

37
<PAGE>

ANTHONY CRANE RENTAL HOLDINGS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(In Thousands)

15. Subsequent Event

16. Supplementary Financial Data (Unaudited)

The following table presents unaudited quarterly operating results for each
of Holding's last eight quarters as well as the percentage of Holding's total
revenues represented by each item. This information has been prepared by
Holdings on a basis consistent with Holding's audited consolidated financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) that management considers necessary for a fair presentation of
the data. These quarterly results are not necessarily indicative of future
results of operations.

<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------
March 31 June 30 September 30 December 31
------------- ------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
Total revenues.......... $45,575 100.0% $44,278 100.0% $ 49,319 100.0% $44,636 100.0%
Gross profit............ 17,384 38.1% 16,164 36.5% 20,811 42.2% 16,872 37.8%
Income before income
taxes.................. 7,629 16.7% 4,594 10.4% 7,323 14.8% 4,351 9.7%
Net income.............. 7,599 16.7% 4,576 10.3% 7,293 14.8% 4,333 9.7%

1998
Total revenues.......... $48,463 100.0% $51,086 100.0% $ 53,982 100.0% $53,128 100.0%
Gross profit............ 17,551 36.2% 20,271 39.7% 20,948 38.8% 18,340 34.5%
Income before income
taxes.................. 4,564 9.4% 5,765 11.3% (13,310)(a) (24.7%) (3,888) (7.3%)
Net income (loss)....... 4,504 9.3% 5,765 11.3% (13,470)(a) (25.0%) (3,888) (7.3%)
</TABLE>
- --------
(a) Includes an extraordinary loss of $15,811 associated with refinancing
indebtedness in connection with the Recapitalization.

38
<PAGE>

ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

PART III

ITEM 10. Directors and Executive Officers of the Registrant

The executive officers of Holdings and the Company serve at the discretion
of ACR Management, L.L.C., a Delaware limited liability company and the
general partner of Holdings and the Company (the "General Partner"), acting
through its board of managers (the "GP Board"). Neither Holdings nor the
Company has a board of managers or similar body. The following table sets
forth information concerning executive officers of the Company and Holdings
and the members of the GP Board (those executive officers indicated by a "*"
following their name are executive officers of Holdings):

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Ray G. Anthony*......... 60 Chairman and Chief Executive Officer
David W. Mahokey*....... 40 Member of the GP Board and Chief Operating Officer
Dale A. Buckwalter*..... 41 Chief Financial Officer
Albert C. Bove.......... 51 Senior Vice President--West Region
Joseph M. Connelly...... 51 Senior Vice President--Northeast Region
Richard Ferchak, Sr..... 53 Senior Vice President--Central Region
Ray Graham.............. 49 Senior Vice President--Regional Development
Michael Corn............ 50 Senior Vice President--Southeast Region
Frank Hanjorgiris....... 36 Vice President of Sales and Marketing
Arthur J. Innamorato*... 44 General Counsel
Paul Edgerley........... 43 Member of the GP Board
Robert C. Gay........... 46 Member of the GP Board
Andrew B. Balson*....... 31 Member of the GP Board
James E. Haas........... 62 Member of the GP Board
William B. Kania........ 66 Member of the GP Board
</TABLE>

Ray G. Anthony is the founder of Anthony Crane Rental, L.P. and currently
serves as its Chairman and Chief Executive Officer. His primary focus is to
aid senior management in reviewing fleet management strategies and to coach
and develop yard managers.

David W. Mahokey has a total of 16 years of experience in the crane rental
business, all of which have been with ACR. As the Chief Operating Officer, Mr.
Mahokey oversees the daily operations of the Company, including all equipment
acquisition and disposition decisions, fleet management, sales and marketing
and personnel issues. He has a direct dialogue with the four regional senior
vice presidents and works closely with them regarding the key operations
issues at the Company. Mr. Mahokey was appointed Chief Operating Officer upon
consummation of the Recapitalization. Prior to that time, he served as the
Company's Chief Financial Officer, a position he held since 1991.

Dale A. Buckwalter has four years of public accounting experience and over
11 years of investment banking experience. He has served as the financial
advisor to ACR for the past five years and has been primarily responsible for
the Company's financial activities during this time. Mr. Buckwalter became the
Company's Chief Financial Officer upon the consummation of the
Recapitalization.

Albert C. Bove has more than 26 years of experience in the crane rental and
general construction industries, 21 of which have been with ACR. Since 1996,
Mr. Bove has served as the Senior Vice President--West Region. Prior to this
time, Mr. Bove served as the Yard Manager of the Company's Phoenix yard, a
position he held since 1992.

39
<PAGE>

Richard Ferchak, Sr. has 31 years experience in the crane rental industry,
all with ACR. Mr. Ferchak is responsible for the operations of the Company's
Central region as Senior Vice President--Central Region. He has been Yard
Manager of the Pittsburgh, Carnegie and Beaumont yards. He was one of the
first ACR employees and has experience in all phases of the crane rental
business.

Ray Graham has 27 years of experience in the crane rental industry, the last
nine of which have been with ACR. Mr. Graham started his career as a crane
operator and has been in a management position for the past 16 years. For the
past three years, Mr. Graham has been responsible for the Southeast region. In
1998, he assumed responsibility as a regional development officer and is
responsible for developing operating plans for any facilities which are deemed
by Management as being underperforming.

Michael Corn has 13 years of experience in the crane rental industry, all of
which have been with ACR. Mr. Corn ran the operations in the Southeast from
1986 to 1995. For the past three years he has managed the Company's Virgin
Islands operation and recently returned to assume operating responsibilities
for the Southeast region.

Joseph M. Connelly has nearly 26 years of experience in construction and
engineering, the last seven of which have been with ACR. Mr. Connelly has
responsibility for the Company's quality control programs and oversees the
operations of the Company's Northeast region.

Frank Hanjorgiris has 10 years of industry sales experience and has been
employed by the Company for four years. Since 1996, Mr. Hanjorgiris has been
Vice President of Sales and Marketing and his primary responsibility has been
the sales of new and used equipment. Mr. Hanjorgiris joined the company as a
salesman of new and used equipment in 1994 and was promoted to Corporate Sales
Manager in 1995. Prior to his employment with the Company, Mr. Hanjorgiris was
employed by Brambles Equipment and American High Reach as a salesman.

Arthur J. Innamorato has 20 years of legal and public accounting experience
and has been a valued advisor to the Company for the past five years. He
assumed the position as General Counsel upon the consummation of the
Recapitalization and is responsible for managing the legal affairs of the
Company. Mr. Innamorato is also involved in strategic planning and the
Company's external growth initiatives.

Paul Edgerley has been Managing Director of Bain since 1993. Since 1990, he
has been a General Partner of Bain Venture Capital, and from 1988 to 1990 he
was a Principal of Bain Venture Capital. He serves on the Boards of Directors
of Steel Dynamics, Inc., GS Technologies Corporation, AMF Group Inc. and Sealy
Corporation.

Robert C. Gay has been a Managing Director of Bain since 1993 and has been a
General Partner of BainVenture Capital since 1989. From 1988 to 1989, Mr. Gay
was a Principal of Bain Venture Capital. Mr. Gay is Vice Chairman of the Board
of Directors of IHF Capital, Inc., parent of ICON Health & Fitness Inc. Mr.
Gay also serves as a director of Alliance Entertainment Corp., GT Bicycles,
Inc., Physio-Control International Corporation, Cambridge Industries, Inc.,
Nutraceutical Corporation, American Pad & Paper Company, GS Technologies
Corporation, Small Fry Snack Foods Limited and Alliance Laundry Holdings LLC.

Andrew B. Balson has been a Principal of Bain since June 1998 and was an
Associate of Bain from 1996 to 1998. From 1994 to 1996, Mr. Balson was a
Consultant for Bain & Company. Previously, he was an Associate with SBC
Australia.

James E. Haas has been Vice President and Director of Sensical Corporation,
a printing company, since 1993. From 1990 to 1993, Mr. Haas was President,
Chief Executive Officer and Director of Edgecomb Metals, a metals distributor.
Mr. Haas is a Director of GS Technologies Corporation.

40
<PAGE>

William B. Kania has been Senior Partner of W.B. Kania & Associates, CPAs
since 1987. Mr Kania is a Director of BT Financial Corporation, Chairman of
North Fayette County Municipal Authority and Vice Chairman of Fayette County
Industrial Development Authority. He was also a Director of Fayette Bank &
Trust Company from 1989 to 1997.

ITEM 11. Executive Compensation

The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company for 1998 of
those persons who served as (i) Chief Executive Officer during the year, and
(ii) the other four most highly compensated executive officers of the Company
or its predecessor for 1998 collectively, the "Named Executive Officers".)

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation (1)
- --------------------------- ---- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
Ray G. Anthony, Chairman and Chief
Executive Officer................ 1998 $338,623.12 $15,000.00 --
Richard Rossi, Vice President of
Administration................... 1998 57,747.60 25,000.00 $308,500.00
Frank Hanjorgiris, Vice President
of Sales and Marketing........... 1998 147,447.00 25,000.00 184,442.00
Michael Corn, Senior Vice
President-Southeast Region....... 1998 126,586.50 96,000.00 34,931.00
Albert C. Bove, Senior Vice
President-Western Region......... 1998 105,200.00 69,714.34 59,755.00
</TABLE>
- --------
(1) Represents commissions earned on the sale of new and used rental
equipment, commissions earned on insurance settlements and deferred
compensation.

Pension Plans

All non-union and certain union employees of the Company are eligible to
participate in the Company's profit sharing defined contribution plan. Under
the plan, the Company contributes an amount determined by the Company (1% of
eligible participant's compensation in 1998). The plan also includes a 401(k)
savings plan feature which enables employees to make voluntary salary
reduction contributions up to 15% of eligible compensation to the plan. The
Company will match fifty percent of the contributions, up to six percent of
participant's compensation.

Multi-employer Benefit Plans

Union employees of the Company are covered by various union-sponsored,
collectively bargained, benefit plans. The Company's contributions to these
multi-employer plans are based on specified amounts per hours worked by the
covered union employees. One such plan is currently in reorganization and the
unfunded amount is being funded through ongoing contributions by all
sponsoring companies. Under certain circumstances, the Company may have to
accelerate such funding. In 1997, the Company paid approximately $600,000
towards its share of the unfunded plan.

Employment Agreements

In connection with the Recapitalization, the Company entered into an
employment agreement with Ray G. Anthony. Such agreement provides for: (i) a
five year employment term (subject to earlier termination in certain
circumstances); (ii) a minimum base salary and a bonus following the end of
each fiscal year, (iii) severance benefits in certain circumstances; (iv) non-
compete and non-solicitation agreements; and (v) other terms and conditions of
Mr. Anthony's employment. The Company may, from time to time, enter into
employment agreements with certain other members of senior management.

41
<PAGE>

Management Equity Participation

In connection with the Recapitalization, Holdings has offered and is
expected to continue to offer certain members of management the opportunity to
purchase up to an aggregate of 10% of the common partnership interests of
holdings, including approximately 6% of which was purchased at the Closing and
4% of which is expected to be purchased in the future. In addition, in order
to provide additional financial incentives to management, certain members of
management are expected to be granted additional equity of up to 10% of the
common partnership interests of Holdings. Such additional options are expected
to be granted periodically and all options vest and become exercisable upon
the occurrence of certain events. The terms of management's equity
participation is expected to be determined in the second quarter of 1999.

Compensation of Members of the GP Board

Members of the GP Board will not he compensated in connection with services
provided in such capacity. Members of the GP Board will be reimbursed for any
out-of-pocket expenses incurred in traveling to and from meetings of the GP
Board.

Compensation and Audit Committees

The GP Board has established an Audit Committee and a Compensation
Committee. The current members of the Audit Committee are Messrs. Balson and
Haas. The Audit Committee oversees actions taken by the Company's independent
auditors, recommends the engagement of auditors and reviews the Company's
internal accounting policies and practices. The current members of the
Compensation Committee are Messrs. Edgerley and Haas. The Compensation
Committee approves the compensation of executives of the Company and makes
recommendations to the GP Board with respect to standards for setting
compensation levels.

42
<PAGE>

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

<TABLE>
<CAPTION>
Number of Percentage of
Common Partnership Common Partnership
Interests on a Interest on a
Name and Address of Beneficial Owner Fully Diluted Basis Fully Diluted Basis
- ------------------------------------ ------------------- -------------------
<S> <C> <C>
Bain/ACR, L.L.C.(1).................... 3,444,444.44 75.6%
c/o Bain Capital, Inc.
Two Copley Place Boston, MA 02116

Anthony Iron and Metal Company......... 820,000.00 18.0%
c/o Anthony Crane Rental, L.P.
1165 Camp Hollow Road West Mifflin, PA
15122

Ray G. Anthony(2)...................... 820,000.00 18.0%
c/o Anthony Crane Rental, L.P.
1165 Camp Hollow Road West Mifflin, PA
15122

David W. Mahokey....................... 182,222.22 4.0%
c/o Anthony Crane Rental, L.P.
1165 Camp Hollow Road West Mifflin, PA
15122

Paul Edgerley(1)....................... 3,058,197.35 67.1%
c/o Bain Capital, Inc.
Two Copley Place Boston, MA 02116

Robert C. Gay(1)....................... 3,128,700.42 68.7%
c/o Bain Capital, Inc.
Two Copley Place Boston, MA 02116

Andrew B. Balson(1).................... 150,177.65 2.4%
c/o Bain Capital, Inc.
Two Copley Place Boston, MA 02116

James E. Haas(3)....................... 233,333.33 5.1%
c/o Haas Family Limited Partnership
745 Beach View Drive Boca Grande, FL
33921

Albert C. Bove......................... 45,555.56 1.0%
c/o Anthony Crane Rental, L.P.
1165 Camp Hollow Road West Mifflin, PA
15122

William B. Kania....................... 17,777.78 0.4%
c/o Anthony Crane Rental, L.P.
1165 Camp Hollow Road West Mifflin, PA
15122

All directors and executive (1)(2)(3).. 4,493,671.51 98.6%
officers as a group (12 persons)
</TABLE>
- --------
(1) The limited liability company units of Bain/ACR, LL.C. will be held by
Bain Capital Fund VI, L.P. ("Fund VI"), BCIP Trust Associates II ("BCIP
Trust II"), BCIP Trust Associates II-B ("BCIP Trust II-B"), BCIP
Associates II ("BCIP II"), ECIP Associates U-B ("BCIP II-B"), BCIP
Associates II-C ("BCIP II-C") and certain unrelated entities. Messrs.
Edgerley and Gay are: (i) Managing Directors of Bain Capital Investors VI,
Inc., the General Partner of Bain Capital Partners VI, L.P., which is the
General Partner of Fund VI; (ii) General Partners of BCIP II; (iii)
General Partners of BCIP Trust II; and (iv) affiliated with BCIP II-C. Mr.
Edgerley is a General Partner of BCIP Trust II--B. Mr. Gay is a General
Partner of BCIP II--B. Mr. Balson is a General Partner of BCIP II--B and
BCIP Trust II-B. Each of Messrs. Edgerley, Gay

43
<PAGE>

and Balson may be deemed to beneficially own units held by entities in
which they have an interest and, accordingly, to beneficially own the
common partnership interests of Holdings held by such entities. Each such
person disclaims beneficial ownership of any such interests in which he
does not have a pecuniary interest.

(2) Mr. Anthony is a General Partner of Anthony Iron and Metal Company
("AIM"). Accordingly, Mr. Anthony may be deemed to beneficially own
interests owned by AIM. Mr. Anthony disclaims beneficial ownership of any
such interests in which he does not have a pecuniary interest.

(3) Mr. Haas is a General Partner of Haas Family Limited Partnership
("HFLP"), a member of the Equity Investor. Accordingly, Mr. Haas may be
deemed to beneficially own interests beneficially owned by HFLP. Mr. Haas
disclaims beneficial ownership of any such interests in which he does not
have a pecuniary interest.

ITEM 13. Certain Relationships and Related Transactions

Securityholders Agreement

Upon the consummation of the Recapitalization, Holdings, the General
Partner, the Equity Investors and the Predecessor Partners entered into a
securityholders agreement (the "Securityholders Agreement"). The
Securityholders Agreement: (i) restricts the transfer of the equity interests
of Holdings; (ii) grants tag-along rights on certain transfers of equity
interests of Holdings; (iii) requires each of the Equity Investors and the
Predecessor Partners to consent to a sale of Holdings to an independent third
party if such sale is approved by a majority of the then outstanding equity
interests of Holdings; and (iv) grants preemptive rights on certain issuances
of equity interests of Holdings. The foregoing provisions of the
Securityholders Agreement will terminate upon the consummation of an Initial
Public Offering (as defined in the Securityholders Agreement) or a Liquidity
Event. For purposes of the Securityholders Agreement, "Liquidity Event" means
(a) any sale to an Independent Third Party of all or substantially all (as
defined in the Model Business Corporation Act) of the assets of Holdings and
its Subsidiaries on a consolidated basis in one transaction or series of
related transactions, (b) any sale to an Independent Third Party of all or
substantially all of the Common Units (as defined) (or a transaction having a
similar effect as contemplated by Section 13.9 of the Holdings Partnership
Agreement (as defined)) in one transaction or series of related transactions,
but excluding any sales of Common Units in a Public Sale (as defined in the
Securityholders Agreement) or (c) a merger or consolidation or other
transaction which accomplishes one of the foregoing. Certain equity holders
and directors of the Issuers, including Bain, and certain other related
parties received one-time transaction fees aggregating $8.8 million upon
consummation of the Transactions.

Advisory Agreement

In connection with the Transactions, the Company entered into an advisory
agreement (the "Advisory Agreement") with Bain Capital, Inc. ("Bain Capital")
pursuant to which Bain Capital agreed to provide: (i) general executive and
management services; (ii) identification, support, negotiation and analysis of
acquisitions and dispositions; (iii) support, negotiation and analysis of
financial alternatives; and (iv) other services agreed upon by the Company and
Bain Capital. In exchange for such services, Bain Capital will receive (i) an
annual management fee of $1.0 million, plus reasonable out-of-pocket expenses
(payable quarterly) and (ii) a transaction fee in an amount in accordance with
the general practices of Bain Capital at the time of the consummation of any
additional acquisition or divestiture by the Company and of each financing or
refinancing. The Advisory Agreement has an initial term of ten years subject
to automatic one-year extensions (unless the Company or Bain Capital provides
written notice of termination), provided that the Advisory Agreement will
terminate automatically upon the consummation of a transaction involving a
sale of all or substantially all of the assets or partnership interests of the
Company.

Registration Rights Agreement

Upon the consummation of the Recapitalization, Holdings, the General
Partner, the Equity Investors and the Predecessor Partners entered into a
registration rights agreement (the "Registration Rights Agreement").

44
<PAGE>

Under the Registration Rights Agreement, the holders of a majority of the
Registrable Securities (as defined in the Registration Rights Agreement) owned
by the Equity Investors and General Partner have the right, subject to certain
conditions, to require Holdings to register any or all of their common equity
interests of Holdings under the Securities Act at Holdings' expense. In
addition, all holders of Registrable Securities are entitled to request the
inclusion of any common equity interests of Holdings subject to the
Registration Rights Agreement in any registration statement at Holdings'
expense whenever Holdings proposes to register any of its common equity
interests under the Securities Act. In connection with all such registrations,
Holdings has agreed to indemnify all holders of Registrable Securities against
certain liabilities, including liabilities under the Securities Act.

Amended and Restated Agreement of Limited Partnership

Holdings and each of the Equity Investors, General Partner and certain of
the Predecessor Partners (collectively, the "Partners") entered into an
Amended and Restated Agreement of Limited Partnership of Holdings (the
"Holdings Partnership Agreement"). The Holdings Partnership Agreement governs
the relative rights and duties of the Partners.

Partnership Units. The ownership interests of the Partners consist of the
Holdings Preferred Units and common units (the "Common Units"). The Common
Units have voting rights and represent the common equity of Holdings. Holders
of the Holdings Preferred Units do not have voting rights but are entitled to
payment of unpaid yield and a return of capital contributions prior to any
distributions made to holders of the Common Units.

Distributions. Subject to any restrictions contained in any financing
agreements to which Holdings or any of its Affiliates (as defined in the
Holdings Partnership Agreement) is a party, the Board may make distributions,
whether in cash, property or securities of Holdings, at any time or from time
to time pursuant to an order of priority set forth in the Holdings Partnership
Agreement. In addition, Holdings may distribute to each holder of units within
75 days after the close of each fiscal year such amounts as determined by the
Board to be appropriate to enable each holder of units to pay estimated income
tax liabilities.

Management. General Partner, as general partner of Holdings, will conduct,
direct and exercise full control over all activities of Holdings; however,
limited partners have voting rights equivalent to their respective economic
interests and, through a majority vote, can remove the General Partner.

Holdings Preferred Units

Upon the consummation of the Recapitalization, Holdings issued the Holdings
Preferred Units with a liquidation preference and fair value of approximately
$22.5 million to the Predecessor Partners. The Holdings Preferred Units are
not redeemable and have a yield of 11.0% per annum, compounded quarterly.
Subject to any restrictions contained in any financing agreements to which
Holdings or any of its Affiliates is a party, the holders of the Holdings
Preferred Units are entitled to receive distributions from Holdings, including
payment of the accrued interest thereon, prior to distributions in respect to
any other partnership interests of Holdings.

Escrow Agreement

Upon the consummation of the Recapitalization, the Company and the
Predecessor Partners entered into an Escrow Agreement (the "Escrow Agreement")
pursuant to which the Company deposited an aggregate of $4.0 million with an
escrow agent in connection with certain distribution amount adjustment
provisions and certain indemnification provisions for the benefit of the
Company pursuant to the Recapitalization Agreement. The Escrow Agreement
provides for the payment of a distribution amount adjustment to the Company or
the Predecessor Partners based on a targeted level of Consolidated Net Worth
(as defined in the Recapitalization Agreement) for the Company as of the
Closing Date. In addition, the Escrow Agreement provides for the payment of
indemnity claims to either the Equity Investors, the Company or the
Predecessor Partners upon any breach by another party of any representation,
warranty, covenant or agreement made in the Recapitalization Agreement. If,
upon payment of the distribution amount adjustment and indemnity claims, if
any, the escrow

45
<PAGE>

fund holds greater than $2.0 million, such amount in excess of $2.0 million)
shall be distributed to the Predecessor Partners. Amounts not in dispute on
the first anniversary of the Recapitalization shall be distributed to the
Predecessor Partners. The amount of the adjustment has not yet been
determined.

Other Related Party Transactions and Potential Conflict of Interest

The Partnership periodically rents and sells equipment to affiliated
companies. Rental revenues from such transactions totaled approximately
$498,000 ,$682,000, and $423,000 and gross proceeds from equipment sales
totaled $670,000, $119,000 and $45,000 in 1998, 1997 and 1996, respectively.
In addition, the Partnership rents equipment, utilizes personnel, and
purchases equipment from affiliated companies. Expenses from such transactions
totaled $851, $652, and $198 in 1998, 1997 and 1996, respectively, and
purchases of equipment totaled $79,000, $218,000 and $50,000 in 1998, 1997 and
1996, respectively. In addition, subsequent to the Recapitalization, the
Partnership also reimburses Mr. Anthony for the Partnership use of his
personal airplanes. Such reimbursement totaled $234,000 in 1998.

The Partnership periodically has made advances to Mr. Anthony. Such
advances, which totaled $3,950 at December 31, 1998 and 1997, have no specific
repayment terms and have been classified as a reduction of partners' capital
in the accompanying Partnership's balance sheets. For federal income tax
purposes, the advances are treated as distributions to Anthony Iron and Metal
Company. In addition, during 1997, advances and other receivables due from Mr.
Anthony totaling $806,000 were charged to the partners' capital account.

Certain employees of the Company have from time to time received equity
interests in entities controlled by Mr. Anthony in conjunction with their
affiliation with the Company.

The GP Board is expected to adopt a Corporate Compliance Policy for the
Company. Such policy will be administered by a Corporate Compliance Officer.
Pursuant to such policy, the Company will prohibit its employees from engaging
in any activity or conduct which appears to conflict with the interests of the
Company, its customers or its suppliers. Reports of any violations of the
policy will be investigated by the Company.

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Exhibits

(b) Financial Statement Schedules

Schedule II--Valuation & Qualifying Accounts

<TABLE>
<CAPTION>
Balance at Balance
Beginning Charged at End
Classification Of Period To Expense Deductions of Period
- -------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1998
Allowance for Doubtful Accounts..... $1,840 $ 475 $(815) $1,500
Year ended December 31, 1997
Allowance for Doubtful Accounts..... $1,850 $ 428 $(438) $1,840
Year ended December 31, 1996
Allowance for Doubtful Accounts..... $1,500 $1,071 $(721) $1,850
</TABLE>

All other schedules have been omitted because they are not applicable or not
required or the required information is included in the consolidated financial
statements or notes thereto.

46
<PAGE>

In connection with our audits of the consolidated financial statements of
Anthony Crane Rental Holdings, L.P. and subsidiaries as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31,
1998, which financial statements are included in this Form 10-K, we have also
audited the financial statement schedule listed in Item 14 in this Form 10-K.

In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

PricewaterhouseCoopers LLP

Pittsburgh,
Pennsylvania
February 19, 1999,
except for Note 15,
as to which the date
is March 23, 1999.

47
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Mifflin, State of Pennsylvania, on March 31,
1999.

Anthony Crane Rental Holdings, L.P.

<TABLE>
<S> <C>
</TABLE>
By:/s/ Ray G. Anthony
...................................
Name: Ray G. Anthony
Title: Chairman and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities indicated on
March 31, 1999.

/s/ Ray G. Anthony
............................. Chairman and Chief
Ray G. Anthony Executive Officer
(principal executive
officer)

/s/ Dale A. Buckwalter
............................. Chief Financial
Dale A. Buckwalter Officer (principal
financial and
accounting officer

/s/ David W. Mahokey
............................. Member of the Board and
David W. Mahokey Chief Operating Officer

/s/ Paul Edgerley
............................. Member of the Board
Paul Edgerley

/s/ Robert C. Gay
............................. Member of the Board
Robert C. Gay

/s/ Andrew B. Balson
............................. Member of the Board
Andrew B. Balson

............................. Member of the Board
James E. Haas

/s/ William B. Kania
............................. Member of the Board
William B. Kania

48
<PAGE>

EXHIBIT INDEX

(1) Exhibits.

<TABLE>
<C> <S>
2.1 Recapitalization Agreement. dated as of June 1, 1998, by and among
Anthony Crane Rental, L.P, Bain/ACR, L.L.C., ACR Management, L.L.C. and
the current owners named therein.*
3.1 Certificate of limited partnership of Anthony Crane Rental Holdings,
L.P.*
3.2 Amended and Restated Agreement of Limited Partnership of Anthony Crane
Rental Holdings, LP*
3.3 Certificate of Incorporation of Anthony Crane Holdings Capital
Corporation*
3.4 Bylaws of Anthony Crane Holdings Capital Corporation.*
4.1 Indenture, dated as of July 22, 1998, among Anthony Crane Rental
Holdings, L.P., Anthony Crane Holdings Capital Corporation and State
Street Bank and Trust Company.*
10.1 Purchase Agreement, dated as of July 16, 1998, by and among Anthony
Crane Rental Holdings, L.P., Anthony Crane Holdings Capital Corporation
and the Initial Purchasers.*
10.2 Registration Rights Agreement, dated as of July 22, 1998, by and among
Anthony Crane Rental Holdings, L.P., Anthony Crane Holdings Capital
Corporation and the Initial Purchasers.*
10.3 Revolving Credit Agreement, dated as of July 22, 1998, among Anthony
Crane Rental, L.P., Anthony Crane Rental Holdings, L.P., the several
banks or other financial institutions or entities from time to time
parties to this Agreement, Goldman Sachs Credit Partners L.P., Fleet
National Bank and DLJ Capital Fund, Inc.*
10.4 Term Loan Credit Agreement, dated as of July 22, 1998, among Anthony
Crane Rental, L.P., Anthony Crane Rental Holdings, L.P., the several
banks or other financial institutions or entities from time to time
parties to this Agreement, Goldman Sachs Credit Partners, L.P., Fleet
National Bank and DLJ Capital Funding, Inc.*
10.5 Securityholders Agreement, dated as of July 22, 1998, by and among ACR
Management, LL.C., Anthony Crane Rental Holdings, L.P. and the
Securityholders.*
10.6 Registration Rights Agreement, made as of July 22, 1998, by and among
Anthony Crane Rental Holdings, L.P., ACR Management, L.L.C., Bain/ACR,
L.L.C. and the Current Owners.*
10.7 Advisory Agreement, dated as of July 22, 1998, by and among Bain
Capital, Inc., Anthony Crane Rental Holdings, L.P. and Anthony Crane
Rental, L.P.*
10.8 Escrow Agreement, dated as of July 22, 1998, by and among Anthony Crane
Rental, L.P., Anthony Iron & Metal Company, David W. Mahokey and Brown
Brothers Harriman & Co.*
10.9 Amended and Restated Agreement of Limited Partnership of Anthony Crane
Rental, L..P.*
10.10 Indenture, dated as of July 22, 1998, by and among Anthony Crane Rental,
L.P., Anthony Crane Capital Corporation, the Guarantors and State Street
Bank and Trust Company.*
10.11 Purchase Agreement, dated as of July 16, 1998, by and among Anthony
Crane Rental, L.P., Anthony Crane Capital Corporation, the Guarantors
and the Initial Purchasers.*
10.12 Registration Rights Agreement, dated as of July 22, 1998, by and among
Anthony Crane Rental L.P., Anthony Crane Capital Corporation, the
Guarantors and the Initial Purchasers.*
10.13 Employment Agreement, dated as of July 22, 1998, by and between Anthony
Crane Rental, L.P. and Ray G. Anthony.*
10.14 Consulting and Noncompetition Agreement, dated as of July 22, 1998, by
and between Anthony Crane Rental, L.P. and Samuel R. Anthony.*
10.15 Executive Purchase Agreement, dated as of July 22, 1998, by and among
ACR Management, L.L.C., Anthony Crane Rental Holdings, L.P. and David W.
Mahokey.*
10.16 Executive Purchase Agreement, dated as of July 22, 1998, by and among
ACR Management, L.L.C., Anthony Crane Rental Holdings, L.P. and Arthur
J. Innamorato.*
10.17 Executive Purchase Agreement, dated as of July 22, 1998, by and among
ACR Management, L.L.C., Anthony Crane Rental Holdings, L.P. and Albert
C. Bove.*
10.18 Executive Purchase Agreement, dated as of July 22, 1998, by and among
ACR Management, L.L.C., Anthony Crane Rental Holdings, L.P. and William
B. Kania.*
10.19 Liability Agreement, dated as of July 22, 1998, by and between Anthony
Crane Rental, L.P. and Anthony Crane Capital Corporation.*
</TABLE>

49
<PAGE>

<TABLE>
<C> <S>
10.20 Liability Agreement, dated as of July 22, 1998, by and between Anthony
Crane Rental Holdings, L.P. and Anthony Crane Holdings Capital
Corporation.*
10.21 Agreement, dated as of August 1, 1996, between Hess Oil Virgin Islands
Corp. and Anthony Crane International, L.P.*
10.22 Sale and Lease Agreement, dated as of July 25, 1996, by and between
Anthony Crane Sales & Leasing, L.P. and Hess Oil Virgin Islands Corp.*
10.23 Master Rental Agreement for Bare Rental Equipment, Dated as of August 1,
1996, by and between Anthony Crane Sales & Leasing, L.P. and Hess Oil
Virgin Islands Corp.*
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of Anthony Crane Rental, L.P.*
23.1 Consent of PricewaterhouseCoopers LLP (contained herein as page 47 of
this Form 10-K)
27.1 Financial Data Schedule
</TABLE>
- --------
* Incorporated by reference to the exhibit of the same number filed with the
Registrant's Registration Statement on Form S-4 (No. 333-65003).

<PAGE>

EXHIBIT 12.1

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes....... $ 8,942 $23,897 $15,898 $14,711 $10,163
Interest expense................. 27,738 13,692 10,873 8,482 6,281
Interest portion of rental
expense......................... 1,650 1,743 589 364 44
------- ------- ------- ------- -------
Total earnings.................. $38,330 $39,332 $27,360 $23,557 $16,488
======= ======= ======= ======= =======
Fixed Charges:
Interest expense................. $27,738 $13,692 $10,873 $ 8,482 $ 6,281
Interest portion of rental
expense......................... 1,650 1,743 589 364 44
------- ------- ------- ------- -------
Total fixed charges............. $29,388 $15,435 $11,462 $ 8,846 $ 6,325
======= ======= ======= ======= =======
Ratio of earnings to fixed
charges.......................... 1.3x 2.5x 2.4x 2.7x 2.6x
</TABLE>

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ANTHONY CRANE RENTAL HOLDINGS, L.P. AND
SUBS AS OF AND FOR THE PERIODS ENDED DECEMBER 31, 1998 AND DECEMBER 31,
1997IDIARIES AS OF AND FOR THE PERIODS ENDED DECEMBER 31, 1998 AND DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 5,633 4,375
<SECURITIES> 0 0
<RECEIVABLES> 29,274 25,992
<ALLOWANCES> (1,500) (1,840)
<INVENTORY> 0 0
<CURRENT-ASSETS> 36,981 38,738
<PP&E> 445,791 361,771
<DEPRECIATION> 112,744 96,937
<TOTAL-ASSETS> 392,192 306,928
<CURRENT-LIABILITIES> 26,980 25,576
<BONDS> 380,333 178,367
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (16,805) 101,416
<TOTAL-LIABILITY-AND-EQUITY> 392,192 306,928
<SALES> 206,659 183,808
<TOTAL-REVENUES> 206,659 183,808
<CGS> 129,549 112,577
<TOTAL-COSTS> 129,549 112,577
<OTHER-EXPENSES> 40,430 33,372
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 27,738 13,962
<INCOME-PRETAX> 8,942 23,897
<INCOME-TAX> 220 96
<INCOME-CONTINUING> 8,722 23,801
<DISCONTINUED> 0 0
<EXTRAORDINARY> 15,811 0
<CHANGES> 0 0
<NET-INCOME> (7,089) 23,801
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>