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What changed in MCGRATH RENTCORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MCGRATH RENTCORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+331 added−291 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in MCGRATH RENTCORP's 2023 10-K

331 paragraphs added · 291 removed · 224 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+23 added−20 removed65 unchanged
Biggest changeExpertise and Customer Service – The Company believes that Adler Tanks has highly experienced operating management and branch employees. Adler Tanks employees are knowledgeable about the operation of its rental equipment and customer applications. The Company believes that Adler Tanks provides a superior level of customer service due to its strong relationship building skills and the quality of its responsiveness.
Biggest changeThe Company believes that Portable Storage provides a superior level of customer service due to its strong relationship building skills, quality of fleet, driver development program and the quality of its responsiveness. Asset Management – The Company believes that Portable Storage markets high quality, well-constructed and well-maintained rental products.
Mobile Modular rents and sells classrooms in California, the Pacific Northwest, Florida, Texas, Louisiana, North Carolina, South Carolina, Georgia, Maryland, Virginia and Washington, D.C. Enviroplex sells classrooms in the California market. California is Mobile Modular’s largest educational market.
Mobile Modular rents and sells classrooms in California, Florida, Georgia, Louisiana, Maryland, North Carolina, the Pacific Northwest, South Carolina, Texas, Virginia and Washington, D.C. Enviroplex sells classrooms in the California market. California is Mobile Modular’s largest educational market.
Any waivers to the Code of Business Conduct and Ethics and any amendments to such code applicable to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer or persons performing similar functions, will be posted on our web site. - 4 - RELOCATABLE MODULAR BUILDINGS Description Modulars are designed for use as classrooms, temporary offices adjacent to existing facilities, sales offices, construction field offices, restroom buildings, health care clinics, child care facilities, office space and for a variety of other purposes and may be moved from one location to another.
Any waivers to the Code of Business Conduct and Ethics and any amendments to such - 4 - code applicable to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer or persons performing similar functions, will be posted on our web site. - 5 - RELOCATABLE MODULAR BUILDINGS Description Modulars are designed for use as classrooms, temporary offices adjacent to existing facilities, sales offices, construction field offices, restroom buildings, health care clinics, child care facilities, office space and for a variety of other purposes and may be moved from one location to another.
The Company’s corporate offices and regional sales and inventory center offices are housed in various sizes of modular units. Since most of Mobile Modular’s customer requirements are to fill temporary space needs, Mobile Modular’s marketing emphasis is on rentals rather than sales. Mobile Modular attracts customers through its website at www.mobilemodular.com, internet advertising and direct marketing.
The Company’s corporate offices and regional sales and inventory center offices are housed in various sizes of modular units. Since most of Mobile Modular’s customer requirements are to fill temporary space needs, Mobile Modular’s marketing emphasis is primarily on rentals rather than sales. Mobile Modular attracts customers through its website at www.mobilemodular.com, internet advertising and direct marketing.
Mobile Modular operates primarily in California, the Pacific Northwest, Texas, Florida, Louisiana, North Carolina, South Carolina, Georgia, Virginia, Maryland and Washington, D.C. Significant competitive factors in the rental business include availability, price, service, reliability, appearance and functionality of the product. Mobile Modular markets high quality, well-constructed and attractive modulars.
Mobile Modular operates primarily in California, Colorado, Florida, Georgia, Louisiana, Maryland, North Carolina, the Pacific Northwest, South Carolina, Texas, Virginia and Washington, D.C. Significant competitive factors in the rental business include availability, price, service, reliability, appearance and functionality of the product. Mobile Modular markets high quality, well-constructed and attractive modulars.
While we incur costs in our business to comply with - 3 - these laws and regulations, management does not believe that the costs of compliance with these various governmental regulations is material to our business and financial condition. Available Information We make the Company’s Securities and Exchange Commission (“SEC”) filings available at our website www.mgrc.com.
While we incur costs in our business to comply with these laws and regulations, management does not believe that the costs of compliance with these various governmental regulations is material to our business and financial condition. Available Information We make the Company’s Securities and Exchange Commission (“SEC”) filings available at our website www.mgrc.com.
Historically, demand in this market has been fueled by shifting and fluctuating student populations, insufficient funding for new school construction, class size reduction - 7 - programs, modernization of aging school facilities and the phasing out of portable classrooms no longer compliant with current building codes.
Historically, demand in this market has been fueled by shifting and fluctuating student populations, insufficient funding for new school construction, class size reduction programs, modernization of aging school facilities and the phasing out of portable classrooms no longer compliant with current building codes.
This knowledge can be attributed to the experience of TRS-RenTelco’s management, sales and operational teams. Operating Structure - TRS-RenTelco is supported by a centralized distribution and inventory center on the grounds of the Dallas-Fort Worth Airport in Texas.
This knowledge can be attributed to the experience of TRS-RenTelco’s management, sales and operational teams. Operating Structure - TRS-RenTelco is supported by a centralized distribution and inventory center on the grounds of the Dallas-Fort Worth International Airport in Texas.
Mobile Modular maintains the units in good working condition while on rent. Upon return, the units are inspected for damage and customers are billed for items considered beyond normal wear and tear. Generally, - 6 - the units are then repaired for subsequent use.
Mobile Modular maintains the units in good working condition while on rent. Upon return, the units are inspected for damage and customers are billed for items considered beyond normal wear and tear. Generally, the units are then repaired for subsequent use.
Modulars are generally provided with installed heat, air conditioning, lighting, electrical outlets and floor covering, and may have customized interiors including partitioning, cabinetry and plumbing facilities. Mobile Modular purchases new modulars from various manufacturers who build to Mobile Modular’s design specifications. During 2022, Mobile Modular purchased 30% of its modular units from one manufacturer.
Modulars are generally provided with installed heat, air conditioning, lighting, electrical outlets and floor covering, and may have customized interiors including partitioning, cabinetry and plumbing facilities. Mobile Modular purchases new modulars from various manufacturers who build to Mobile Modular’s design specifications. During 2023, Mobile Modular purchased 30% of its modular units from one manufacturer.
With these characteristics, a significant base of - 2 - rental assets on rent generates a considerable amount of operating cash flows to support continued rental asset growth.
With these characteristics, a significant base of rental assets on rent generates a considerable amount of operating cash flows to support continued rental asset growth.
The Board of Directors also receives regular updates from senior management on matters relating to the Company’s strategy for the recruitment, retention and development of the Company’s employees. The Company provides training in technical, operational and managerial skills, and places special emphasis on safety, effective communications, customer service, and employee development.
The Board of Directors also receives regular updates from senior management on matters relating to the Company’s strategy for the recruitment, retention and development of the Company’s employees. The Company provides training in technical, operational and leadership skills, and places special emphasis on safety, effective communications, customer service, and employee development.
Rental units for temporary classroom and other educational space needs are an important market segment and the Company believes Mobile Modular is the leading supplier in California and Florida, and a significant supplier in Texas, of modular educational facilities for rental to both public and private schools.
Rental units for temporary classroom and other educational space needs are an important industry segment and the Company believes Mobile Modular is a leading supplier in California and Florida, and a significant supplier in Texas, of modular educational facilities for rental to both public and private schools.
Such sales can be of either new or used units from the rental fleet, which permits some turnover of older units. During 2022 Mobile Modular’s largest sale represented approximately 4% of Mobile Modular’s sales, 3% of the Company’s consolidated sales and less than 1% of the Company’s consolidated revenues.
Such sales can be of either new or used units from the rental fleet, which permits some turnover of older units. During 2023 Mobile Modular’s largest sale represented approximately 4% of Mobile Modular’s sales, 3% of the Company’s consolidated sales and less than 1% of the Company’s consolidated revenues.
Sales Profit from equipment sales is a material component of TRS-RenTelco’s overall annual earnings. Gross profit from sales of both used and new equipment over the last five years generally has ranged from approximately 20% to 23% of total annual gross profit for our electronics division.
Sales Profit from equipment sales is a material component of TRS-RenTelco’s overall annual earnings. Gross profit from sales of both used and new equipment over the last five years generally has ranged from approximately 20% to 22% of total annual gross profit for our electronics division.
The Montreal facility houses sales engineers and operations staff to serve the Canadian market. As of December 31, 2022, the original cost of electronic test equipment inventory was comprised of 80% general purpose electronic test equipment and 20% communications electronic test equipment.
The Montreal facility houses sales engineers and operations staff to serve the Canadian market. As of December 31, 2023, the original cost of electronic test equipment inventory was comprised of 80% general purpose electronic test equipment and 20% communications electronic test equipment.
Mobile Modular has expertise in the licensing and regulatory requirements that govern modulars in the states where it operates, and its management, sales and operational staffs are knowledgeable and committed to providing exemplary customer service.
Mobile Modular has expertise in the licensing and regulatory requirements that govern modulars in the states where it operates, and its management, sales and operational staffs are knowledgeable and committed to providing exemplary customer service. Mobile Modular has expertise in project management and complex applications.
The largest electronic test equipment sale during 2022 represented 8% of electronic test equipment sales, 1% of the Company’s consolidated sales and less than 1% of consolidated revenues. There is intense competition in the sales of electronic test equipment from a world-wide network of test equipment brokers and resellers, legacy rental companies, and equipment manufacturers.
The largest electronic test equipment sale during 2023 represented 7% of electronic test equipment sales, 1% of the Company’s consolidated sales and less than 1% of consolidated revenues. There is intense competition in the sales of electronic test equipment from a world-wide network of test equipment brokers and resellers, legacy rental companies, and equipment manufacturers.
These factors may impact the quarterly results of each year’s first and fourth quarter. Competition The electronic test equipment rental business is characterized by intense competition from several competitors, including Electro Rent Corporation, Continental Resources, and TestEquity, some of which may have access to greater financial and other resources than we do.
These factors may impact the quarterly results of each year’s first and fourth quarter. Competition The electronic test equipment rental business is characterized by intense competition from several competitors, some of which may have access to greater financial and other resources than we do.
Competitive Strengths Market Leadership - The Company believes that TRS-RenTelco is one of the largest electronic test equipment rental and leasing companies offering a broad and deep selection of general purpose and communications test equipment for rent in North America.
Competitive Strengths Strong Industry Position - The Company believes that TRS-RenTelco is one of the largest electronic test equipment rental and leasing companies offering a broad and deep selection of general purpose and communications test equipment for rent in North America.
For 2022, gross profit on equipment sales was approximately 22% of total division gross profit. Equipment sales are driven by the turnover of older technology rental equipment, to maintain target utilization at a model number level, and new equipment sales opportunities. In 2022, approximately 16% of the electronic test equipment revenues were derived from sales.
For 2023, gross profit on equipment sales was approximately 21% of total division gross profit. Equipment sales are driven by the turnover of older technology rental equipment, to maintain target utilization at a model number level, and new equipment sales opportunities. In 2023, approximately 18% of the electronic test equipment revenues were derived from sales.
As a result, our competitors that have these advantages may be better able to attract and retain customers and provide their products and services at lower rental rates. Adler Tanks competes with these companies based upon product availability, product quality, price, service and reliability.
As a result, our competitors that have these advantages may be better able to attract and retain customers and provide their products and services at lower rental rates. Portable Storage competes with these companies based upon product - 10 - availability, product quality, price and service.
Mobile Modular’s largest market segment is for temporary classroom and other educational space needs of public and private schools, colleges and universities in California and Florida, and to a lesser extent in Texas, Louisiana, North Carolina, South Carolina, Georgia, Maryland, Virginia and Washington, D.C.
Mobile Modular’s largest business segment is for temporary classroom and other educational space needs of public and private schools, colleges and universities in California, Florida, Georgia, Louisiana, Maryland, North Carolina, South Carolina, Texas, Virginia and Washington, D.C.
References in this report to the “Company”, “we”, “us”, and “ours” refer to McGrath RentCorp and its subsidiaries, unless the context requires otherwise. The Company is a diversified business-to-business rental company with four rental divisions: relocatable modular buildings, portable storage containers, electronic test equipment, and liquid and solid containment tanks and boxes.
References in this report to the “Company”, “we”, “us”, and “ours” refer to McGrath RentCorp and its subsidiaries, unless the context requires otherwise. The Company is a diversified business-to-business rental company with three rental divisions: relocatable modular buildings, portable storage containers and electronic test equipment.
Expertise – The Company believes that over the 40 plus years during which Mobile Modular has competed in the modular rental industry, it has developed expertise that differentiates it from its competitors. Mobile Modular has dedicated its attention to continuously developing and improving the quality of its modular units.
Expertise – The Company believes that over the 40 plus years during which Mobile Modular has competed in the modular rental industry, it has developed expertise that delivers value to customers. Mobile Modular has dedicated its attention to continuously developing and improving the quality of its modular units.
Consolidated Rental and Sales Revenue percentage is calculated by dividing Modular rental and sales revenues to public schools (K-12) by the Company’s consolidated rental and sales revenues.
Consolidated Rental and Sales Revenue percentage is calculated by dividing Modular rental and sales revenues to public schools (K-12) by the Company’s consolidated rental and sales revenues from continuing operations. 2.
Modular buildings (“modulars”) have an estimated life of eighteen years compared to the typical rental term of twelve to twenty-four months, electronic test equipment has an estimated life range of one to eight years (depending on the type of product) compared to a typical rental term of one to six months, and liquid and solid containment tanks and boxes have an estimated life of twenty years compared to typical rental terms of one to six months. • We believe short-term rental rates typically recover the Company’s original investment quickly based on the respective product’s annual yield, or annual rental revenues divided by the average cost of rental equipment.
Modular buildings (“modulars”) have an estimated life of eighteen years compared to the typical rental term of twelve to twenty-four months, portable storage containers ("containers") have an estimated life of twenty-five years compared to a typical rental term of three to twelve months and electronic test equipment has an estimated life range of one to eight years (depending on the type of product) compared to a typical rental term of one to six months. - 3 - • We believe short-term rental rates typically recover the Company’s original investment quickly based on the respective product’s annual yield, or annual rental revenues divided by the average cost of rental equipment.
For modulars the original investment is recovered in approximately four years, in approximately three years for electronic test equipment and in approximately five years for liquid and solid containment tanks and boxes. • When a product is sold from our rental inventory, a significant portion of the original investment is usually recovered.
For modulars the original investment is recovered in approximately four years, in approximately three years for containers and approximately three years for electronic test equipment. • When a product is sold from our rental inventory, a significant portion of the original investment is usually recovered.
Service needs of TRS-RenTelco’s customers are supported 24 hours a day, 7 days a week by its customer care specialists. TRS-RenTelco’s goal is to provide service beyond its customers’ expectations, which, the Company believes, results in customer loyalty and repeat business.
TRS-RenTelco’s sophisticated in-house laboratory ensures the equipment is fully functional and meets its customers’ delivery requirements. Service needs of TRS-RenTelco’s customers are supported 24 hours a day, 7 days a week by its customer care specialists. TRS-RenTelco’s goal is to provide service beyond its customers’ expectations, which, the Company believes, results in customer loyalty and repeat business.
Some of our competitors in the modular building leasing industry, notably WillScot Mobile Mini Holdings Corp, have a greater range of products and services, greater financial and marketing resources, larger customer bases, and greater name recognition than we have. In addition, a number of other smaller companies operate regionally throughout the country.
Some of our competitors in the modular building leasing industry, have a greater range of products and services, greater financial and marketing resources, larger customer bases, and greater name recognition than we have. In addition, a number of other smaller companies operate regionally throughout the country and have a stronger local presence in those places.
Mobile Modular requires manufacturers to build to its specifications, which enables Mobile Modular to maintain a standardized quality fleet. In addition, through its ongoing repair, refurbishment and maintenance programs, the Company believes Mobile Modular’s buildings are the best maintained in the industry. The Company depreciates its modular buildings over an 18 year estimated useful life to a 50% residual value.
Mobile Modular requires manufacturers to build to its specifications, which enables Mobile Modular to maintain a standardized quality fleet. In addition, through its ongoing repair, refurbishment and maintenance programs, the Company believes Mobile Modular’s buildings are the best maintained in the industry.
At December 31, 2022, the Company was comprised of four reportable business segments: (1) its modular building and portable storage segment (“Mobile Modular”); (2) its electronic test equipment segment (“TRS-RenTelco”); (3) its containment solutions for the storage of hazardous and non-hazardous liquids and solids segment (“Adler Tanks”); and (4) its classroom manufacturing business selling modular buildings used primarily as classrooms in California (“Enviroplex”).
At December 31, 2023, the Company was comprised of four reportable business segments: (1) its modular building segment (“Mobile Modular”); (2) its portable storage container segment (“Portable Storage”); (3) its electronic test equipment segment (“TRS-RenTelco”); and (4) its classroom manufacturing business selling modular buildings used primarily as classrooms in California (“Enviroplex”).
At December 31, 2022, TRS-RenTelco had an electronic test equipment rental inventory including accessories with an aggregate cost of $398.3 million. Utilization is calculated each month by dividing the cost of the rental equipment on rent by the total cost of rental equipment, excluding accessory equipment. Utilization was 59.4% as of December 31, 2022 and averaged 64.2% during the year.
At December 31, 2023, TRS-RenTelco had an electronic test equipment rental inventory including accessories with an aggregate cost of $377.6 million. Utilization is calculated each month by dividing the cost of the rental equipment on rent by the total cost of rental equipment, excluding accessory equipment. Utilization was 55.9% as of December 31, 2023 and averaged 58.9% during the year.
Over the last three years, used equipment sold each year represented approximately 2% of rental equipment, and has been, on average, 14 years old with sale proceeds above its net book value.
Over the last three years, used equipment sold each year represented approximately 2% of rental equipment, and has been, on average, 14 years old with sale proceeds above its net book value. Competitive Strengths Strong Industry Position – Mobile Modular has a leading modular building fleet in the United States.
The Company has no assurance that it will continue to be able to use existing modular equipment with minimal upgrades as building codes change in the future.
The Company has no assurance that it will continue to be able to use existing modular equipment with minimal upgrades as building codes change in the future. Mobile Modular operates from regional sales and inventory centers serving large geographic areas.
Utilization is calculated at the end of each month by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding new equipment inventory and accessory equipment. At December 31, 2022, fleet utilization was 80.7% and average fleet utilization during 2022 was 79.1%.
Utilization is calculated at the end of each month by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding new equipment inventory and accessory equipment.
Mobile Modular’s goal is to continuously improve its procedures, processes and computer systems to enhance internal operational efficiency. The Company believes this dedication to customer service results in high levels of customer loyalty and repeat business.
Mobile Modular is committed to offering quick response to requests for information, providing experienced assistance, on time delivery and preventative maintenance of its units. Mobile Modular’s goal is to continuously improve its procedures, processes and computer systems to enhance internal operational efficiency. The Company believes this dedication to customer service results in high levels of customer loyalty and repeat business.
Human Capital Management As of December 31, 2022, the Company had 1,218 employees, of whom 133 were primarily administrative and executive personnel, with 705, 166, 134 and 80 in the operations of Mobile Modular, Adler Tanks, TRS-RenTelco and Enviroplex, respectively.
Human Capital Management As of December 31, 2023, the Company had 1,204 employees, of whom 133 were primarily administrative and executive personnel, with 677, 180, 128 and 86 in the operations of Mobile Modular, Portable Storage, TRS-RenTelco and Enviroplex, respectively.
("Vesta Modular"), a portfolio company of Kinderhook Industries, that is a leading provider of temporary and permanent modular space solutions, for a cash purchase price of $400 million, subject to certain adjustments.
On the same date, the Company acquired Vesta Housing Solutions Holdings, Inc. (“Vesta Modular”), a portfolio company of Kinderhook Industries, that was a leading provider of temporary and permanent modular space solutions, for a cash purchase price of $437.2 million, subject to certain adjustments.
At December 31, 2022, Mobile Modular owned 70,233 new or previously rented modulars and portable storage containers with an aggregate cost of $1,123.3 million including accessories, or an average cost per unit of $15,993.
At December 31, 2023, Mobile Modular owned 40,382 new or previously rented modulars, with an aggregate cost of $1,291.1 million including accessories, or an average cost per unit of $31,972.
The following table shows the approximate percentages of the Company’s modular rental and sales revenues, and of its consolidated rental and sales revenues for the past five years, that rentals and sales to these schools constitute: Rentals and Sales to Public Schools (K-12) as a Percentage of Total Rental and Sales Revenues Percentage of: 2022 2021 2020 2019 2018 Modular Rental Revenues (Mobile Modular) 24% 28% 33% 32% 33% Modular Sales Revenues (Mobile Modular & Enviroplex) 42% 49% 48% 64% 70% Modular Rental and Sales Revenues (Mobile Modular & Enviroplex) 29% 34% 38% 42% 44% Consolidated Rental and Sales Revenues 1 19% 21% 23% 25% 24% 1.
The following table shows the approximate percentages of the Company’s modular rental and sales revenues, and of its consolidated rental and sales revenues for the past three years, that rentals and sales to these schools constitute: - 8 - Rentals and Sales to Public Schools (K-12) as a Percentage of Total Rental and Sales Revenues Percentage of: 2023 2022 2021 Modular Rental Revenues (Mobile Modular) 26% 30% 34% Modular Sales Revenues (Mobile Modular & Enviroplex) 30% 43% 50% Modular Rental and Sales Revenues (Mobile Modular & Enviroplex) 27% 35% 40% Consolidated Rental and Sales Revenues 1 18% 21% 24% 1.
Customer Service - The Company believes that its focus on providing excellent service to its customers provides a competitive advantage. TRS-RenTelco strives to provide exemplary service to fulfill its commitments to its customers.
Customer Service - The Company believes that its focus on providing excellent service to its customers provides a competitive advantage. TRS-RenTelco strives to provide exemplary service to fulfill its commitments to its customers. TRS-RenTelco prides itself - 12 - in providing solutions to meet customers’ needs by having equipment available and responding quickly and thoroughly to their requests.
The Company believes operating from large regional sales and inventory centers results in better operating margins as operating costs can be spread over a large installed customer base.
These sales and inventory centers have in-house infrastructure and operational capabilities to support quick and efficient repair, modification, and refurbishment of equipment for the next rental opportunity. The Company believes operating from large regional sales and inventory centers results in better operating margins as operating costs can be spread over a large installed customer base.
In addition, the fleet’s utilization is regionally optimized by managing inventory through estimates of market demand, fulfillment of current rental and sale order activity, modular returns and capital purchases. Customer Service - The Company believes the modular rental industry to be service intensive and locally based.
Also, as a result of Mobile Modular’s maintenance programs, when a modular unit is sold, a high percentage of the equipment’s capitalized cost is recovered. In addition, the fleet’s utilization is regionally optimized by managing inventory through estimates of market demand, fulfillment of current rental and sale order activity, modular returns and capital purchases.
The Company strives to provide excellent service by meeting its commitments to its customers, being proactive in resolving project issues and seeking to continuously improve the customers’ experience. Mobile Modular is committed to offering quick response to requests for information, providing experienced assistance, on time delivery and preventative maintenance of its units.
Customer Service - The Company believes the modular rental industry to be service intensive and locally based. The Company strives to provide excellent service by meeting its commitments to its customers, being proactive in resolving project issues and seeking to continuously improve the customers’ experience.
Some of our competitors also have longer operating histories and lower cost basis of rental equipment than we have. In addition, certain of our competitors are more geographically diverse than we are and have greater name recognition among customers than we do.
Some of our competitors may be larger than we are, have greater financial and other resources than we have, are more geographically diverse than we are and have greater name recognition among customers than we do. Portable Storage also competes against local companies that may have longer operating histories and a strong local presence.
There is no certainty on the timing of the bond sales and it could take additional years before projects funded by these bonds generate meaningful demand for relocatable classrooms. - 8 - ELECTRONIC TEST EQUIPMENT Description TRS-RenTelco rents and sells electronic test equipment nationally and internationally from two facilities located on the grounds of the Dallas Fort Worth International Airport in Grapevine, Texas (the “Dallas facility”) and Dollard-des-Ormeaux, Canada (the “Montreal facility”).
Portable Storage may encounter increased competition from existing competitors or from new entrants in the future. - 11 - ELECTRONIC TEST EQUIPMENT Description TRS-RenTelco rents and sells electronic test equipment nationally and internationally from two facilities located on the grounds of the Dallas Fort Worth International Airport in Grapevine, Texas (the “Dallas facility”) and Dollard-des-Ormeaux, Canada (the “Montreal facility”).
Mobile Modular has expertise in project management and complex applications. - 5 - Operating Structure – Part of the Company’s strategy for Mobile Modular is to create facilities and infrastructure capabilities that its competitors cannot easily duplicate.
Operating Structure – Part of the Company’s strategy for Mobile Modular is to create facilities and infrastructure capabilities that allow it to drive greater efficiency and pass the benefits to customers.
Asset Management – The Company believes that Adler Tanks markets a high quality, well-constructed and well-maintained rental product. The Company depreciates its tanks and boxes over a 20 year estimated useful life to 0% residual value. We believe that if maintained, older tanks and boxes will continue to produce similar rental rates as newer equipment.
The Company depreciates its containers over a 25-year estimated useful life to 62.5% residual value. We believe that if maintained, older containers will continue to produce similar rental rates as newer equipment. The fleet’s utilization is regionally optimized by understanding key vertical market customer demand, seasonality factors, competitors’ product availability and expected equipment returns.
Monthly rental rates typically are between 2% and 10% of the equipment’s original acquisition cost. At December 31, 2022, Adler Tanks had rental equipment inventory including accessories with an aggregate cost of $308.4 million. Utilization is calculated each month by dividing the cost of the rental equipment on rent by the total cost of rental equipment, excluding accessory equipment.
At December 31, 2023, Portable Storage owned 42,210 containers with an aggregate cost of $236.1 million or an average cost per unit of $5,594. Utilization is calculated each month by dividing the cost of the rental equipment on rent by the total cost of rental equipment, excluding new and accessory equipment.
Older buildings continue to be productive primarily because of Mobile Modular’s focus on ongoing fleet maintenance. Also, as a result of Mobile Modular’s maintenance programs, when a modular unit is sold, a high percentage of the equipment’s capitalized cost is recovered.
The Company depreciates its modular buildings over an 18 year estimated useful life - 6 - to a 50% residual value. Older buildings continue to be productive primarily because of Mobile Modular’s focus on ongoing fleet maintenance.
The tank and box rental products may be utilized throughout the U.S. and are not subject to any local or regional construction code or approval standards. Rentals Adler Tanks rents tanks and boxes typically for rental periods of one to six months, although in some instances, rental terms can be up to a year or longer.
Market The portable storage container rental market in the U.S. has a large and diverse number of market segments including construction, retail, commercial and industrial, energy and petrochemical, manufacturing, education and healthcare. The container rental products may be utilized throughout the U.S. and are not subject to any local or regional construction code or approval standards.
Adler Tanks purchases tanks and boxes from various manufacturers located throughout the country. On February 1, 2023, the Company sold the Adler Tanks business to Ironclad Environmental Solutions, Inc., a Kinderhook portfolio company, for a cash sale price of $265 million, subject to certain adjustments.
On February 1, 2023, the Company completed the sale of its former liquid and solid containment segment (“Adler Tanks”), to Ironclad Environmental Solutions, Inc., a portfolio company of Kinderhook Industries, for a cash sale price of $268.0 million. The consolidated financial statements present the historical financial results of the former Adler Tanks segment as discontinued operations for all periods presented.
Liquid and solid containment tanks and boxes asset management requires selecting and purchasing quality product and making ongoing repair and maintenance investments to ensure its long rental life.
Container asset management requires selecting and purchasing quality products and making ongoing repair and maintenance investments. Steel containers have no technical obsolescence.
Removed
On February 1, 2023, the Company sold the Adler Tanks business to Ironclad Environmental Solutions, Inc., a Kinderhook portfolio company, for a cash sale price of $265 million, subject to certain adjustments. On the same date, the Company acquired Vesta Housing Solutions Holdings, Inc.
Added
The financial results of Vesta Modular were a part of the Mobile Modular segment since February 1, 2023.
Removed
Mobile Modular currently operates from regional sales and inventory centers in California, Texas, Florida, Georgia and Virginia, serving large geographic areas in these and surrounding states, and sales offices serving Louisiana, North Carolina and South Carolina.
Added
Proposed Acquisition by WillScot Mobile Mini On January 28, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WillScot Mobile Mini Holdings Corp., a Delaware corporation (“WillScot Mobile Mini”), Brunello Merger Sub I, Inc., a California corporation and a direct wholly owned subsidiary of WillScot Mobile Mini (“Merger Sub I”), and Brunello Merger Sub II, LLC, a Delaware limited liability company and direct wholly owned subsidiary of WillScot Mobile Mini (“Merger Sub II”).
Removed
In 2021, the Company purchased substantially all of the assets of Design Space Modular Buildings PNW, LP, which operated from a number of smaller sales and inventory centers across the Western United States. In 2021, the Company completed the purchase of the assets of GRS Holding LLC, DBA Kitchens To Go (“Kitchens To Go”).
Added
The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub I will merge with and into the Company (the “First-Step Merger”), with the Company surviving the First-Step Merger and, immediately thereafter, the Company will merge with and into Merger Sub II (the “Second-Step Merger” and together with the First-Step Merger, the “Transaction”), with Merger Sub II surviving the - 2 - Second-Step Merger as a wholly owned subsidiary of WillScot Mobile Mini.
Removed
Kitchens To Go provides interim and permanent modular kitchen solutions serving the United States from its inventory center in Indiana. These sales and inventory centers have in-house infrastructure and operational capabilities to support quick and efficient repair, modification, and refurbishment of equipment for the next rental opportunity.
Added
Each of the parties to the Merger Agreement intends that the Transaction will be treated as a single integrated transaction that qualifies as a “reorganization” within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended.
Removed
On February 1, 2023, the Company acquired Vesta Modular, a portfolio company of Kinderhook Industries, that is a leading provider of temporary and permanent modular space solutions, for a cash purchase price of $400 million, subject to certain adjustments. The acquisition creates a larger scaled modular business with increased geographic coverage and density to serve customers.
Added
Consummation of the Transaction is subject to the approval of the Company’s shareholders, the receipt of required regulatory approvals, and satisfaction or waiver of other customary closing conditions. The First-Step Merger and the Second-Step Merger will be consummated on the same day.
Removed
Competitive Strengths Market Leadership – Mobile Modular has the leading modular building and container fleet in the United States.
Added
On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the First-Step Merger (the “Effective Time”), each share of common stock, no par value, of the Company (the “Company Common Stock”) issued and outstanding immediately prior to the Effective Time, other than shares of Company Common Stock owned by WillScot Mobile Mini or any subsidiary of WillScot Mobile Mini or the Company, and shares held by shareholders who did not vote in favor of the Transaction (or consent thereto in writing) and who are entitled to demand and properly demands appraisal of such shares, will be automatically converted into the right to receive either (1) $123 in cash (the “Per Share Cash Consideration”) or (2) 2.8211 (the “Exchange Ratio”) shares of validly issued, fully paid and nonassessable shares of common stock, par value $0.0001, of WillScot Mobile Mini (the “WillScot Mobile Mini Common Stock”) (the “Per Share Stock Consideration” together with the Per Share Cash Consideration, the “Merger Consideration”), as determined pursuant to the election and allocation procedures set forth in the Merger Agreement.
Removed
The Mobile Modular segment includes the results of operations of Mobile Modular Portable Storage and Kitchens To Go, which represented approximately 11% and 2% of the Company’s 2022 total revenues, respectively. Sales In addition to operating its rental fleet, Mobile Modular sells modulars to customers.
Added
The Company’s shareholders will have the opportunity to elect to receive either the Per Share Cash Consideration or the Per Share Stock Consideration in respect of their Company Common Stock, provided that 60% of the Company Common Stock will be converted into the cash consideration and 40% of the Company Common Stock will be converted into the stock consideration.
Removed
TRS-RenTelco prides itself in providing solutions to meet customers’ needs by having equipment available and responding quickly and thoroughly to their requests. - 9 - TRS-RenTelco’s sophisticated in-house laboratory ensures the equipment is fully functional and meets its customers’ delivery requirements.
Added
The consummation of the Transaction is subject to certain closing conditions, including (i) the approval of the Company’s shareholders, (ii) the expiration or termination of all waiting periods applicable to the transactions contemplated by the Merger Agreement under the Hart-Scott Rodino Antitrust Improvements Act of 1976 (the “HSR Act,” and such expiration or termination, the “Antitrust Approval”), (iii) the absence of any order by any governmental authorities or other legal restraint or prohibition preventing the consummation of the transactions contemplated by the Merger Agreement, (iv) the effectiveness of the registration statement to be filed by WillScot Mobile Mini with SEC relating to the registration of shares of WillScot Mobile Mini Common Stock to be issued to the Company’s shareholders pursuant to the Merger Agreement and (v) other customary conditions specified in the Merger Agreement.
Removed
Some of our competitors may offer similar equipment for lease, rental or sales at lower prices and may offer more extensive servicing, or financing options. - 10 - LIQUID AND SOLID CONTAINMENT TANKS AND BOXES Description Adler Tanks’ rental inventory is comprised of tanks and boxes used for various containment solutions to store hazardous and non-hazardous liquids and solids in applications such as: refinery, chemical and industrial plant maintenance, environmental remediation and field services, infrastructure building construction, marine services, oil and gas exploration and field services, pipeline construction and maintenance, tank terminals services, wastewater treatment, and waste management and landfill services.
Added
The parties have submitted their respective filings under the HSR Act with the U.S. Department of Justice and the Federal Trade Commission as contemplated by the Merger Agreement. The closing of the Transaction is not subject to any financing condition.
Removed
The tanks and boxes are comprised of the following products: • fixed axle steel tanks (“tanks”) for the storage of groundwater, wastewater, volatile organic liquids, sewage, slurry and bio sludge, oil and water mixtures and chemicals, which are available in a variety of sizes including 21,000 gallon, 16,000 gallon and 8,000 gallon sizes; • vacuum containers (“boxes”), which provide secure containment of sludge and solid materials and may be used for additional on-site storage or for transporting materials off-site enabling vacuum trucks to remain in operation; • dewatering boxes for the separation of water contained in sludge and slurry; and • roll-off and trash boxes for the temporary storage and transport of solid waste.
Added
For additional information regarding the Transaction, please refer to our current report on Form 8-K and Amendment No. 1 on Form 8-K/A, each filed with the U.S. Securities and Exchange Commission on January 29, 2024.
Removed
Competitive Strengths Market Leadership - The Company believes that Adler Tanks is one of the largest participants in the liquid and solid containment tanks and boxes rental business in North America. Adler Tanks has national reach from branches serving the Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West.
Added
Because the Transaction is not yet complete, and except as otherwise specifically stated, the descriptions and disclosures presented elsewhere in this Form 10-K assume the continuation of the Company as a public company.
Removed
The fleet’s utilization is regionally optimized by understanding key vertical market customer demand, seasonality factors, competitor’s product availability and expected equipment returns.
Added
At December 31, 2023, fleet utilization was 79.4% and average fleet utilization during 2023 was 79.7%. - 7 - Sales In addition to operating its rental fleet, Mobile Modular sells modulars to customers.
Removed
Market Liquid and solid containment equipment rental is a market in the U.S with a large and diverse number of market segments including refinery, chemical and industrial plant maintenance, environmental remediation and field services, infrastructure building construction, marine services, oil and gas exploration and field services, pipeline construction and maintenance, electrical grid transformer maintenance, tank terminals services, wastewater treatment, and waste management and landfill services.
Added
During the year ended December 31, 2023, the Company determined that the Portable Storage segment met the criteria for separate segment reporting and the Company divested its Adler Tanks segment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+44 added−8 removed140 unchanged
Biggest changeFurthermore, sustained uncertainty about, or worsening of, current global economic conditions, including further escalation of tensions between Russia and Western countries, as well as further escalation of trade tensions between the U.S. and China, could result in a global economic slowdown and long-term changes to global trade.
Biggest changeMacroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses, and may make it more difficult to refinance debt. - 28 - Furthermore, sustained uncertainty about, or worsening of, geopolitical tensions, including further escalation of war between Russia and Ukraine, further escalation of trade tensions between the U.S. and China, escalation of tensions between China and Taiwan, further escalation in the conflict between the State of Israel and Hamas, as well as further escalation of tensions between the State of Israel and various countries in the Middle East and North Africa, could result in a global economic slowdown and long-term changes to global trade.
The market price of our common stock fluctuates on the NASDAQ Global Select Market and is likely to be affected by a number of factors including but not limited to: • our operating performance and the performance of our competitors, and in particular any variations in our operating results or dividend rate from our stated guidance or from investors’ expectations; • any changes in general conditions in the global economy, the industries in which we operate or the global financial markets; • investors’ reaction to our press releases, public announcements or filings with the SEC; • the stock price performance of our competitors or other comparable companies; - 15 - • any changes in research analysts’ coverage, recommendations or earnings estimates for us or for the stocks of other companies in our industry; • any sales of common stock by our directors, executive officers and our other large shareholders, particularly in light of the limited trading volume of our stock; • any merger and acquisition activity that involves us or our competitors; and • other announcements or developments affecting us, our industry, customers, suppliers or competitors.
The market price of our common stock fluctuates on the NASDAQ Global Select Market and is likely to be affected by a number of factors including but not limited to: • our operating performance and the performance of our competitors, and in particular any variations in our operating results or dividend rate from our stated guidance or from investors’ expectations; • any changes in general conditions in the global economy, the industries in which we operate or the global financial markets; • investors’ reaction to our press releases, public announcements or filings with the SEC; • the stock price performance of our competitors or other comparable companies; • any changes in research analysts’ coverage, recommendations or earnings estimates for us or for the stocks of other companies in our industry; • any sales of common stock by our directors, executive officers and our other large shareholders, particularly in light of the limited trading volume of our stock; • any merger and acquisition activity that involves us or our competitors; and • other announcements or developments affecting us, our industry, customers, suppliers or competitors.
Acquisitions involve numerous risks, including the following: • difficulties in integrating the operations, technologies, products and personnel of the acquired companies; • diversion of management’s attention from normal daily operations of our business; • difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets may have stronger market positions; • difficulties in complying with regulations applicable to any acquired business, such as environmental regulations, and managing risks related to an acquired business; • timely completion of necessary financing and required amendments, if any, to existing agreements; • an inability to implement uniform standards, controls, procedures and policies; - 17 - • undiscovered and unknown problems, defects, damaged assets liabilities, or other issues related to any acquisition that become known to us only after the acquisition; • negative reactions from our customers to an acquisition; • disruptions among employees related to any acquisition which may erode employee morale; • loss of key employees, including costly litigation resulting from the termination of those employees; • an inability to realize cost efficiencies or synergies that we may anticipate when selecting acquisition candidates; • recording of goodwill and non-amortizable intangible assets that will be subject to future impairment testing and potential periodic impairment charges; • incurring amortization expenses related to certain intangible assets; and • becoming subject to litigation.
Acquisitions involve numerous risks, including the following: • difficulties in integrating the operations, technologies, products and personnel of the acquired companies; • diversion of management’s attention from normal daily operations of our business; • difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets may have stronger market positions; • difficulties in complying with regulations applicable to any acquired business, such as environmental regulations, and managing risks related to an acquired business; - 19 - • timely completion of necessary financing and required amendments, if any, to existing agreements; • an inability to implement uniform standards, controls, procedures and policies; • undiscovered and unknown problems, defects, damaged assets liabilities, or other issues related to any acquisition that become known to us only after the acquisition; • negative reactions from our customers to an acquisition; • disruptions among employees related to any acquisition which may erode employee morale; • loss of key employees, including costly litigation resulting from the termination of those employees; • an inability to realize cost efficiencies or synergies that we may anticipate when selecting acquisition candidates; • recording of goodwill and non-amortizable intangible assets that will be subject to future impairment testing and potential periodic impairment charges; • incurring amortization expenses related to certain intangible assets; and • becoming subject to litigation.
If the currency exchange rates change unfavorably, the value of net receivables we receive in foreign currencies and later convert to U.S. dollars after the unfavorable change would be diminished. This could have a negative impact on our reported operating results. We currently do not engage in hedging strategies to mitigate this risk. - 26 -
If the currency exchange rates change unfavorably, the value of net receivables we receive in foreign currencies and later convert to U.S. dollars after the unfavorable change would be diminished. This could have a negative impact on our reported operating results. We currently do not engage in hedging strategies to mitigate this risk.
Our failure to effectively remarket a large influx of units returning from leases could negatively affect our financial performance and our ability to continue expanding our rental fleet. In addition, if returned units stay off rent for an extended period of time, we may incur additional costs to securely store and maintain them.
Our failure to effectively remarket a large influx of units returning from leases could negatively affect our financial performance and our ability to continue expanding our - 25 - rental fleet. In addition, if returned units stay off rent for an extended period of time, we may incur additional costs to securely store and maintain them.
Currently, total foreign country customers and operations account for less than 10% of the Company’s revenues. In recent years some of our customers have expanded their international operations faster than domestic operations, and this trend may continue. Over time, the amount of our international business may increase if we focus on international market opportunities.
Currently, total foreign country customers and operations account for less than 10% of the Company’s revenues. In recent years some of our customers have expanded their international operations faster than domestic operations, and this trend may continue. Over - 27 - time, the amount of our international business may increase if we focus on international market opportunities.
Significant equipment returns may result in lower utilization until equipment can be redeployed or sold, which may cause rental rates to decline and negatively affect our revenues and operating income. - 22 - Failure to comply with applicable regulations could harm our business and financial condition, resulting in lower operating results and cash flows.
Significant equipment returns may result in lower utilization until equipment can be redeployed or sold, which may cause rental rates to decline and negatively affect our revenues and operating income. Failure to comply with applicable regulations could harm our business and financial condition, resulting in lower operating results and cash flows.
Our results and related ratios, such as gross margin, operating income percentage and effective tax rate may fluctuate as a result of a number of factors, some of which are beyond our control including but not limited to: • general economic conditions in the geographies and industries where we rent and sell our products; • legislative and educational policies where we rent and sell our products; • the budgetary constraints of our customers; • seasonality of our rental businesses and our end-markets; • success of our strategic growth initiatives; • costs associated with the launching or integration of new or acquired businesses; • the timing and type of equipment purchases, rentals and sales; • the nature and duration of the equipment needs of our customers; • the timing of new product introductions by us, our suppliers and our competitors; • the volume, timing and mix of maintenance and repair work on our rental equipment; • supply chain delays or disruptions; • our equipment mix, availability, utilization and pricing; • inflation in the cost of materials, labor and new rental equipment; • the mix, by state and country, of our revenues, personnel and assets; • rental equipment impairment from excess, obsolete or damaged equipment; • movements in interest rates or tax rates; • changes in, and application of, accounting rules; • changes in the regulations applicable to us; and • litigation matters.
Our results and related ratios, such as gross margin, operating income percentage and effective tax rate may fluctuate as a result of a number of factors, some of which are beyond our control including but not limited to: • general economic conditions in the geographies and industries where we rent and sell our products; • legislative and educational policies where we rent and sell our products; • the budgetary constraints of our customers; • seasonality of our rental businesses and our end-markets; • success of our strategic growth initiatives; • costs associated with the launching or integration of new or acquired businesses; • the timing and type of equipment purchases, rentals and sales; • the nature and duration of the equipment needs of our customers; • the timing of new product introductions by us, our suppliers and our competitors; • the volume, timing and mix of maintenance and repair work on our rental equipment; • supply chain delays or disruptions; • our equipment mix, availability, utilization and pricing; • inflation in the cost of materials, labor and new rental equipment; • the mix, by state and country, of our revenues, personnel and assets; • rental equipment impairment from excess, obsolete or damaged equipment; • movements in interest rates or tax rates; • changes in, and application of, accounting rules; • changes in the regulations applicable to our business operations; and • claims and litigation matters.
Generally, when a customer continues to rent the modular units beyond the contractual term, the equipment rents on a month-to-month basis. If a significant number of our rented modular units were returned during a short period of time, particularly those units that are rented on a month-to-month basis, a large supply of units would need to be remarketed.
Generally, when a customer continues to rent the units beyond the contractual term, the equipment rents on a month-to-month basis. If a significant number of our rented units were returned during a short period of time, particularly those units that are rented on a month-to-month basis, a large supply of units would need to be remarketed.
Failure to properly select, manage and respond to - 25 - the technological needs of our customers and changes to our products through their technology life cycle may cause certain electronic test equipment to become obsolete, resulting in impairment charges, which may negatively impact operating results and cash flows.
Failure to properly select, manage and respond to the technological needs of our customers and changes to our products through their technology life cycle may cause certain electronic test equipment to become obsolete, resulting in impairment charges, which may negatively impact operating results and cash flows.
A change in the manner of - 23 - use or the elimination of “piggyback” contracts would likely negatively impact our ability to book new business from these government customers and could cause our administrative expenses related to processing these orders to increase significantly.
A change in the manner of use or the elimination of “piggyback” contracts would likely negatively impact our ability to book new business from these government customers and could cause our administrative expenses related to processing these orders to increase significantly.
As a result of these factors, our historical financial results are not necessarily indicative of our future results or stock price. Our stock price has fluctuated and may continue to fluctuate in the future, which may result in a decline in the value of your investment in our common stock.
As a result of these factors, our historical financial results are not necessarily indicative of our future results or stock price. - 17 - Our stock price has fluctuated and may continue to fluctuate in the future, which may result in a decline in the value of your investment in our common stock.
Impairment may result from significant changes in the manner of use of the acquired asset, negative industry or economic trends and significant underperformance relative to historic or projected operating results. - 18 - Our rental equipment is subject to residual value risk upon disposition and may not sell at the prices or in the quantities we expect.
Impairment may result from significant changes in the manner of use of the acquired asset, negative industry or economic trends and significant underperformance relative to historic or projected operating results. - 20 - Our rental equipment is subject to residual value risk upon disposition and may not sell at the prices or in the quantities we expect.
If we have an event of default under these instruments, our indebtedness could be accelerated, and we may not be able to refinance such indebtedness or make the required accelerated payments. The agreements governing our Series C, D and E Senior Notes (as defined and more fully described under the heading “Item 7.
If we have an event of default under these instruments, our indebtedness could be accelerated, and we may not be able to refinance such indebtedness or make the required accelerated payments. The agreements governing our Series D, E and F Senior Notes (as defined and more fully described under the heading “Item 7.
If we are unable to pass these increased costs on to our customers, our profitability, operating cash flows and financial condition could be negatively impacted. Expansions of our modular operations into new markets may negatively affect our operating results. In the past we have expanded our modular operations into new geographies and states.
If we are unable to pass these increased costs on to our customers, our profitability, operating cash flows and financial condition could be negatively impacted. Expansions of our modular and portable storage operations into new markets may negatively affect our operating results. In the past we have expanded our modular and portable storage operations into new geographies and states.
Although this is the historical seasonality of our business, it is subject to change or may not meet our expectations, which may have adverse consequences for our business. We face strong competition in our modular building markets and we may not be able to effectively compete.
Although this is the historical seasonality of our business, it is subject to change or may not meet our expectations, which may have adverse consequences for our business. We face strong competition in our modular building and portable storage markets and we may not be able to effectively compete.
Upon detection, we promptly undertook steps - 16 - to address the incident, restored network systems and resumed normal operations. The attack did not result in any material disruption to our operations or ability to service our customers and did not affect our financial performance.
Upon detection, we promptly undertook steps - 18 - to address the incident, restored network systems and resumed normal operations. The attack did not result in any material disruption to our operations or ability to service our customers and did not affect our financial performance.
We rely on our subcontractor service companies to meet customer demands for timely shipment and return, and the loss or inadequate number of subcontractor service companies may cause prices to increase, while negatively impacting our reputation and operating performance.
We rely on our drivers and subcontractor service companies to meet customer demands for timely shipment and return, and the loss or inadequate number of driver and subcontractor service companies may cause prices to increase, while negatively impacting our reputation and operating performance.
Historically, accounts receivable write-offs and write-offs related to equipment not returned by customers have not been significant and have averaged less than 1% of total revenues over the last five years. If economic conditions deteriorate, we may see an increase in bad debt relative to historical levels, which may materially and adversely affect our operations.
Historically, accounts receivable write-offs and write-offs related to equipment not returned by customers have not been significant and have averaged less than 1% of total revenues over the last five years. If economic conditions deteriorate, we may see an increase in credit losses relative to historical levels, which may materially and adversely affect our operations.
With the exception of Enviroplex, none of the principal suppliers are affiliated with the Company. During 2022, Mobile Modular purchased 30% of its modular product from one manufacturer.
With the exception of Enviroplex, none of the principal suppliers are affiliated with the Company. During 2023, Mobile Modular purchased 30% of its modular product from one manufacturer.
Effective management of our rental assets is vital to our business. If we are not successful in these efforts, it could have a material adverse impact on our results of operations. Our modular, electronics and liquid and solid containment rental products have long useful lives and managing those assets is a critical element to each of our rental businesses.
Effective management of our rental assets is vital to our business. If we are not successful in these efforts, it could have a material adverse impact on our results of operations. Our modular, containers and electronics rental products have long useful lives and managing those assets is a critical element to each of our rental businesses.
SPECIFIC RISKS RELATED TO OUR RELOCATABLE MODULAR BUILDINGS BUSINESS SEGMENT: Significant reductions of, or delays in, funding to public schools have caused the demand and pricing for our modular classroom units to decline, which has in the past caused, and may cause in the future, a reduction in our revenues and profitability.
SPECIFIC RISKS RELATED TO OUR RELOCATABLE MODULAR BUILDINGS AND PORTABLE STORAGE BUSINESS SEGMENTS: Significant reductions of, or delays in, funding to public schools have caused the demand and pricing for our modular classroom units to decline, which has in the past caused, and may cause in the future, a reduction in our revenues and profitability.
Business segments that experience significant market disruptions or declines may experience increased customer credit risk and higher bad debt expense. Failure to manage our credit risk and receive timely payments on our customer accounts receivable may result in write-offs and/or loss of equipment, particularly electronic test equipment.
Business segments that experience significant market disruptions or declines may experience increased customer credit risk and higher credit losses. Failure to manage our credit risk and receive timely payments on our customer accounts receivable may result in write-offs and/or loss of equipment, particularly electronic test equipment.
The immaterial breach of our information technology system and any future breaches could subject us to reputational damage. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.
The immaterial breach of our information technology system that we suffered in 2021 and any future breaches could subject us to reputational damage. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.
If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results. At December 31, 2022, we had $173.4 million of goodwill and intangible assets, net, on our consolidated balance sheets. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.
If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results. At December 31, 2023, we had $387.8 million of goodwill and intangible assets, net, on our Consolidated Balance Sheets. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.
If we do not effectively compete in the rental equipment market, our operating results will be materially and adversely affected. The electronic test equipment rental business is characterized by intense competition from several competitors, including Electro Rent Corporation, Continental Resources and TestEquity, some of which may have access to greater financial and other resources than we do.
If we do not effectively compete in the rental equipment market, our operating results will be materially and adversely affected. The electronic test equipment rental business is characterized by intense competition from several competitors some of which may have access to greater financial and other resources than we do.
We are subject to laws and regulations governing government contracts. These laws and regulations expose us to business volatility and risks, including government budgeting cycles and appropriations, potential early termination of contracts, procurement regulations, governmental policy shifts, audits, investigations, sanctions and penalties.
These laws and regulations expose us to business volatility and risks, including government budgeting cycles and appropriations, potential early termination of contracts, procurement regulations, governmental policy shifts, audits, investigations, sanctions and penalties.
These combined competitors may be better able to respond to changes in the relocatable modular building market, to finance acquisitions, to fund internal growth and to compete for market share, any of which could harm our business.
These competitors may be better able to respond to changes in the relocatable modular building and portable storage container markets, to finance acquisitions, to fund internal growth and to compete for market share, any of which could harm our business.
We may not be able to quickly redeploy modular units returning from leases, which could negatively affect our financial performance and our ability to expand, or utilize, our rental fleet. As of December 31, 2022, 63% of our modular portfolio had equipment on rent for periods exceeding the original committed term.
We may not be able to quickly redeploy modular and container units returning from leases, which could negatively affect our financial performance and our ability to expand, or utilize, our rental fleet. As of December 31, 2023, 55% of our modular and 57% of our container portfolios had equipment on rent for periods exceeding the original committed term.
These interest rate adjustments could cause periodic fluctuations in our operating results and cash flows. Our annual debt service obligations increase by approximately $3.1 million per year for each 1% increase in the average interest rate we pay based on the $313.8 million balance of variable rate debt outstanding at December 31, 2022.
These interest rate adjustments could cause periodic fluctuations in our operating results and cash flows. Our annual debt service obligations increase by approximately $5.9 million per year for each 1% increase in the average interest rate we pay based on the $588.0 million balance of variable rate debt outstanding at December 31, 2023.
Any reductions in funding available to the school districts from the states in which we do business may cause school districts to experience budget shortfalls and to reduce their demand for our products despite growing student populations, class size reduction initiatives and modernization and reconstruction project needs, which could reduce our revenues and operating income and consequently have a material adverse effect on the Company’s financial condition.
Any reductions in funding available to the school districts from the states in which we do business may cause school districts to experience budget shortfalls and to reduce their demand for our products despite growing student populations, class size reduction initiatives and modernization and reconstruction project needs, which could reduce our revenues and operating income and consequently have a material adverse effect on the Company’s financial condition. - 23 - Public policies that create demand for our products and services may change, resulting in decreased demand for or the pricing of our products and services, which could negatively affect our revenues and operating income.
Some of our competitors in the modular building leasing industry, notably WillScot Mobile Mini Holdings Corp, have a greater range of products and services, greater financial and marketing resources, larger customer bases, and greater name recognition than we have.
Some of our competitors in the modular building leasing industry have greater range of products and services, greater financial and marketing resources, larger customer bases, and greater name recognition than we have.
We continue to consider expansion opportunities domestically and internationally for our rental businesses. Since the Company’s effective tax rate depends on business levels, personnel and assets located in various jurisdictions, further expansion into new markets or acquisitions may change the effective tax rate in the future and may make it, and consequently our earnings, less predictable going forward.
Since the Company’s effective tax rate depends on business levels, personnel and assets located in various jurisdictions, further expansion into new markets or acquisitions may change the effective tax rate in the future and may make it, and consequently our earnings, less predictable going forward.
McGrath derives a portion of its revenues from contracts with U.S. federal government entities, government prime contractors, state entities and local entities, including school districts.
Mobile Modular and Portable Storage derive a portion of its revenues from contracts with U.S. federal government entities, government prime contractors, state entities and local entities, including school districts.
Adverse economic conditions in the United States and globally, including the potential onset of recession, could have a negative effect on our business, results of operations, financial condition and liquidity.
Adverse economic conditions in the United States and globally, as well as geopolitical tensions, could have a negative effect on our business, results of operations, financial condition and liquidity.
Modular asset management requires designing and building the product for a long life that anticipates the needs of our customers, including anticipating potential changes in legislation, regulations, building codes and local permitting in the various markets in which the Company operates.
Generally, we design units and find manufacturers to build them to our specifications for our modulars and containers. Modular asset management requires designing and building the product for a long life that anticipates the needs of our customers, including anticipating potential changes in legislation, regulations, building codes and local permitting in the various markets in which the Company operates.
The majority of our rental equipment portfolio is comprised of general purpose test and measurement instruments purchased from leading manufacturers such as Keysight Technologies, Rhode & Schwarz and Tektronix, a division of Fortive Corporation. We depend on purchasing equipment from these manufacturers and suppliers for use as our rental equipment.
The majority of our rental equipment portfolio is comprised of general purpose test and measurement instruments purchased from leading manufacturers. We depend on purchasing equipment from these manufacturers and suppliers for use as our rental equipment.
These liabilities can be imposed on the parties generating, transporting or disposing of such substances or on the owner or operator of any affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances. - 19 - Several aspects of our businesses involve risks of environmental and health and safety liability.
These liabilities - 21 - can be imposed on the parties generating, transporting or disposing of such substances or on the owner or operator of any affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances.
There can be no assurance that our efforts to protect our data and information technology systems will prevent future breaches in our systems (or that of our third-party providers) that could adversely affect our business and result in financial and reputational harm to us, theft of trade secrets and other proprietary information, legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties.
Such breaches could adversely affect our business and result in financial and reputational harm to us, theft of trade secrets and other proprietary information, legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties.
The Company believes that the loss of any of its primary manufacturers of modulars could have an adverse effect on its operations since Mobile Modular could experience higher prices and longer delivery lead times for modular product until other manufacturers were able to increase their production capacity. - 24 - Failure to properly design, manufacture, repair and maintain the modular product may result in impairment charges, potential litigation and reduction of our operating results and cash flows.
The Company believes that the loss of any of its primary manufacturers of modulars could have an adverse effect on its operations since Mobile Modular could experience higher prices and longer delivery lead times for modular product until other manufacturers were able to increase their production capacity.
If any of our facilities or a significant amount of our rental equipment were to experience a catastrophic loss, it could disrupt our operations, delay orders, shipments and revenue recognition and result in expenses to repair or replace the damaged rental equipment and facility not covered by insurance, which could have a material adverse effect on our results of operations. - 20 - INTEREST RATE AND INDEBTEDNESS RISKS: Our debt instruments contain covenants that restrict or prohibit our ability to enter into a variety of transactions and may limit our ability to finance future operations or capital needs.
If any of our facilities or a significant amount of our rental equipment were to experience a catastrophic loss, it could disrupt our operations, delay orders, shipments and revenue recognition and result in expenses to repair or - 22 - replace the damaged rental equipment and facility not covered by insurance, which could have a material adverse effect on our results of operations.
In addition, expansion into new markets may be affected by local economic and market conditions. Expansion of our operations into new markets will require a significant amount of attention from our management, a commitment of financial resources and will require us to add qualified management in these markets, which may negatively impact our operating results.
Expansion of our operations into new markets will require a significant amount of attention from our management, a commitment of financial resources and will require us to add qualified management in these markets, which may negatively impact our operating results. - 24 - We are subject to laws and regulations governing government contracts.
For each of our modular, electronic test equipment and liquid and solid containment assets, we must successfully maintain and repair this equipment cost-effectively to maximize the useful life of the products and the level of proceeds from the sale of such products.
For each of our modular, container and electronic test equipment assets, we must successfully maintain and repair this equipment cost-effectively to maximize the useful life of the products and the level of proceeds from the sale of such products. To the extent that we are unable to do so, our result of operations could be materially adversely affected.
Electronic test equipment asset management requires understanding, selecting and investing in equipment technologies that support market demand, including anticipating technological advances and changes in manufacturers’ selling prices. Liquid and solid containment asset management requires designing and building the product for a long life, using quality components and repairing and maintaining the products to prevent leaks.
Electronic test equipment asset management requires understanding, selecting and investing in equipment technologies that support market demand, including anticipating technological advances and changes in manufacturers’ selling prices. Container asset management requires obtaining high quality, well-constructed products and repairing and maintaining the products to ensure its long life.
We also could incur costs or liabilities related to waste disposal or remediating soil or groundwater contamination at our properties, at our customers’ properties or at third party landfill and disposal sites.
We could incur unexpected costs, penalties and other civil and criminal liability if we fail to comply with applicable environmental or health and safety laws. We also could incur costs or liabilities related to waste disposal or remediating soil or groundwater contamination at our properties, at our customers’ properties or at third party landfill and disposal sites.
Adverse economic conditions in the United States and globally have from time to time caused or exacerbated significant slowdowns in our industry and in the markets in which we operate, which have adversely affected our business and results of operations. - 21 - Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses, and may make it more difficult to refinance debt.
Adverse economic conditions in the United States and globally have from time to time caused or exacerbated significant slowdowns in our industry and in the markets in which we operate, which have adversely affected our business and results of operations.
Electronic test equipment rental and sales revenues are primarily affected by the business activity within these industries related to research and development, manufacturing, and communication infrastructure installation and maintenance. Historically, these industries have been cyclical and have experienced periodic downturns, which can have a material adverse impact on the industry’s demand for equipment, including our rental electronic test equipment.
Historically, these industries have been cyclical and have experienced periodic downturns, which can have a material - 26 - adverse impact on the industry’s demand for equipment, including our rental electronic test equipment.
We estimate the useful life of the modular product to be 18 years with a residual value of 50%. However, proper design, manufacture, repairs and maintenance of the modular product during our ownership is required for the product to reach the estimated useful life of 18 years with a residual value of 50%.
However, proper design, manufacture, repairs and maintenance of the products during our ownership is required for the product to reach their useful lives and residual values.
For example, our operations involve the use of petroleum products, solvents and other hazardous substances in the construction and maintaining of modular buildings and for fueling and maintaining our delivery trucks and vehicles. We also own, transport and rent tanks and boxes in which waste materials are placed by our customers.
Several aspects of our businesses involve risks of environmental and health and safety liability. For example, our operations involve the use of petroleum products, solvents and other hazardous substances in the construction and maintaining of modular buildings and for fueling and maintaining our delivery trucks and vehicles.
We are unable to predict whether or when any prospective acquisition will be completed.
We anticipate that we will continue to consider acquisitions in the future that meet our strategic growth plans. We are unable to predict whether or when any prospective acquisition will be completed.
To the extent public school districts’ funding is reduced for the rental and purchase of modular buildings, our business could be harmed and our results of operations negatively impacted.
Furthermore, even if voters have approved facility bond measures and the state has raised bond funds, there is no guarantee that individual school projects will be funded in a timely manner. To the extent public school districts’ funding is reduced for the rental and purchase of modular buildings, our business could be harmed and our results of operations negatively impacted.
If interest rates rise in the future, and, particularly if they rise significantly, interest expense will increase and our net income will be negatively affected. GENERAL RISKS: Our effective tax rate may change and become less predictable as our business expands, or as a result of federal and state tax law changes, making our future earnings less predictable.
GENERAL RISKS: Our effective tax rate may change and become less predictable as our business expands, or as a result of federal and state tax law changes, making our future earnings less predictable. We continue to consider expansion opportunities domestically and internationally for our rental businesses.
To the extent that we are unable to do so, our result of operations could be materially adversely affected. The nature of our businesses, including the ownership of industrial property, exposes us to the risk of litigation and liability under environmental, health and safety and products liability laws.
The nature of our businesses, including the ownership of industrial property, exposes us to the risk of litigation and liability under environmental, health and safety and products liability laws. Violations of environmental or health and safety related laws or associated liability could have a material adverse effect on our business, financial condition and results of operations.
Violations of environmental or health and safety related laws or associated liability could have a material adverse effect on our business, financial condition and results of operations. We are subject to national, state, provincial and local environmental laws and regulations concerning, among other things, solid and liquid waste and hazardous substances handling, storage and disposal and employee health and safety.
We are subject to national, state, provincial and local environmental laws and regulations concerning, among other things, hazardous substance handling, storage and disposal and employee health and safety. These laws and regulations are complex and frequently change.
In the first quarter of 2023, the Company acquired Vesta Modular, a portfolio company of Kinderhook Industries, that is a leading provider of temporary and permanent modular space solutions. We anticipate that we will continue to consider acquisitions in the future that meet our strategic growth plans.
During 2023, the Company acquired Vesta Modular, a portfolio company of Kinderhook Industries, that was a leading provider of temporary and permanent modular space solutions, the assets of Brekke Storage and Inland Leasing, regional providers of portable storage solutions in the Colorado market, and the assets of Dixie Storage, a regional provider of portable storage solutions in the South Carolina market.
Removed
The impact of COVID-19 on our operations, and the operations of our customers, suppliers and logistics providers, may harm our business. We continue to monitor the ongoing impact of COVID-19 outbreak around the globe.
Added
RISKS RELATED TO THE PROPOSED ACQUISITION BY WILLSCOT MOBILE MINI: There are material uncertainties and risks associated with the proposed Transaction, including the timing of the consummation of the Transaction, which may adversely affect our business and ongoing operations, financial condition and results of operations, employees, customers, shareholders, other parties and business prospects, and a failure to complete the Transaction on the terms reflected in the Merger Agreement, if at all, could have a material and adverse effect on our business, financial condition, results of operations, cash flows and stock price. • The announcement and pendency of the proposed Transaction may adversely affect our business, financial condition and results of operations. • On January 28, 2024, we entered into the Merger Agreement with WillScot Mobile Mini.
Removed
This includes evaluating the impact on our customers, suppliers, and logistics providers as well as evaluating governmental actions being taken to curtail the spread of the virus. Significant uncertainty continues to exist concerning the magnitude of the impact and duration of the COVID-19 pandemic and related variants.
Added
Uncertainty about the effect of the proposed Transaction on our employees, customers, shareholders and other parties may have an adverse effect on our business, financial condition and results of operation regardless of whether the proposed Transaction is completed.
Removed
While the Company’s operating segments and branch locations currently continue to operate, the Company’s results of operations may be negatively impacted by project delays, supply chain delays or disruptions; elevated costs for materials and labor; early returns of equipment currently on rent with customers; overall decreased customer demand for new rental orders, rental related services and sales of new and used rental equipment; and payment delay, or non-payment, by customers who are significantly impacted by COVID-19.
Added
The risks to our business include the following, all of which could be exacerbated by a delay in the completion of the proposed Transaction: • the impairment of our ability to attract, retain, and motivate our employees, including key personnel; • the diversion of significant management time and resources towards the completion of the proposed Transaction; • difficulties maintaining relationships with customers, suppliers, and other business partners; • delays or deferments of certain business decisions by our customers, suppliers, and other business partners; • the inability to pursue alternative business opportunities or make appropriate changes to our business because the Merger Agreement requires us to use reasonable best efforts to conduct our business in the ordinary course of business and not engage in certain kinds of transactions prior to the completion of the proposed Transaction; • litigation relating to the proposed Transaction and the costs related thereto; and • the incurrence of significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed Transaction.
Removed
In the second quarter 2021, we acquired the assets of Design Space Modular Buildings PNW, LP (“Design Space”), a provider of modular buildings and portable storage containers for rental and sale to customers in the West and Pacific Northwest states in the U.S. and GRS Holding LLC, DBA Kitchens to Go (“Kitchens To Go”), a provider of interim and permanent modular solutions for foodservice providers that require flexible facilities to continue or expand operations.
Added
Additionally, in approving the Merger Agreement, our Board of Directors considered a number of factors and potential benefits, including the fact that the Transaction consideration to be received by holders of our common stock represented an approximate 10% premium over the Company’s closing stock price of $111.75 on January 26, 2024, the last full trading day prior to the announcement of the proposed Transaction.
Removed
Generally, we design units and find manufacturers to build them to our specifications for our modular and liquid and solid containment tanks and boxes.
Added
If the Transaction is not completed, neither we nor the holders of our common stock may realize this benefit of the Transaction. • Failure to consummate the proposed Transaction within the expected timeframe or at all could have a material adverse impact on our business, financial condition and results of operations.
Removed
These laws and regulations are complex and frequently change. We could incur unexpected costs, penalties and other civil and criminal liability if we fail to comply with applicable environmental or health and safety laws.
Added
There can be no assurance that the proposed Transaction will be consummated. The consummation of the proposed Transaction is subject to certain regulatory approvals and customary closing conditions.
Removed
Furthermore, even if voters have approved facility bond measures and the state has raised bond funds, there is no guarantee that individual school projects will be funded in a timely manner. As a consequence of the most recent economic recession, many states and local governments experienced large budget deficits resulting in severe budgetary constraints among public school districts.
Added
The obligation of each party to consummate the Transaction is also conditioned upon the other party’s representations and warranties being true and correct to the extent specified in the Merger Agreement and the other party having performed in all material respects its obligations under the Merger Agreement.
Removed
Public policies that create demand for our products and services may change, resulting in decreased demand for or the pricing of our products and services, which could negatively affect our revenues and operating income.
Added
There can be no assurance that these and other conditions to closing will be satisfied in a timely manner or at all.
Added
The Merger Agreement also includes customary termination provisions for both the Company and WillScot Mobile Mini, and we may be required to pay WillScot Mobile Mini a termination fee equal to $120 million in certain specified circumstances, including, among other circumstances, if WillScot Mobile Mini terminates the Merger Agreement following a Company Adverse Recommendation Change prior to receipt of Company Shareholder Approval (each as defined in the Merger Agreement) or (ii) the Company terminates the Merger Agreement to enter into an alternative acquisition agreement in respect of a Superior Proposal (as defined in the Merger Agreement).
Added
If we are required to make this payment, doing so may materially adversely affect our business, financial condition and results of operations. - 15 - There can be no assurance that a remedy will be available to us in the event of a breach of the Merger Agreement by WillScot Mobile Mini or its affiliates or that we will wholly or partially recover for any damages incurred by us in connection with the proposed Transaction.
Added
A failed transaction may result in negative publicity and a negative impression of us among our customers or in the investment community or business community generally.
Added
Furthermore, any disruptions to our business resulting from the announcement and pendency of the proposed Transaction, including any adverse changes in our relationships with our customers, partners, suppliers and employees, could continue or accelerate in the event of a failed transaction.
Added
In addition, if the proposed Transaction is not completed, and there are no other parties willing and able to acquire the Company at a price of $123.00 per share or higher, on terms acceptable to us, the share price of our common stock will likely decline to the extent that the current market price of our common stock reflects an assumption that the proposed Transaction will be completed.
Added
Also, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Transaction, for which we will have received little or no benefit if the proposed Transaction is not completed.
Added
Many of these fees and costs will be payable by us even if the proposed Transaction is not completed and may relate to activities that we would not have undertaken other than to complete the proposed Transaction. • Prior to the completion of the Transaction or the termination of the Merger Agreement in accordance with its terms, we are prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to us and our shareholders.
Added
After the date of the Merger Agreement and prior to the Effective Time, the Merger Agreement restricts us from taking specified actions without the consent of WillScot Mobile Mini (which consent may not be unreasonably withheld, conditioned or delayed) and requires that our business be conducted in all material respects in the ordinary course of business.
Added
These restrictions may prevent us from making appropriate changes to our businesses or organizational structures or from pursuing attractive business opportunities that may arise prior to the completion of the Transaction and could have the effect of delaying or preventing other strategic transactions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. The Company’s corporate and administrative offices are located in Livermore, California in approximately 26,000 square feet. At December 31, 2022, the Company’s four reportable business segments conducted operations from the following locations: Mobile Modular – Mobile Modular operates from 14 owned and 40 leased locations.
Biggest changeITEM 2. PROPERTIES. The Company’s corporate and administrative offices are located in Livermore, California in approximately 26,000 square feet. At December 31, 2023, the Company’s four reportable business segments conducted operations from the following locations: Mobile Modular and Portable Storage – Mobile Modular and Portable Storage operate from 22 owned and 60 leased locations.
Our largest owned facilities include seven inventory centers, at which relocatable modular buildings and storage containers are displayed, refurbished and stored: Livermore, California (137 acres in the San Francisco Bay Area), Mira Loma, California (79 acres in the Los Angeles area), Pasadena, Texas (50 acres in the Houston area), Grand Prairie, Texas (43 acres in the Dallas area), Auburndale, Florida (123 acres in the Orlando area), Arcade, Georgia (48 acres in the Atlanta area), Fredericksburg, Virginia (68 acres in the Washington D.C. area).
Our largest owned facilities include seven inventory centers, at which relocatable modular buildings and storage containers are displayed, refurbished and stored: Livermore, California (140 acres in the San Francisco Bay Area), Mira Loma, California (82 acres in the Los Angeles area), Pasadena, Texas (50 acres in the Houston area), Grand Prairie, Texas (30 acres in the Dallas area), Auburndale, Florida (123 acres in the Orlando area), Arcade, Georgia (48 acres in the Atlanta area), Fredericksburg, Virginia (68 acres in the Washington D.C. area).
Removed
Adler Tanks – Adler Tanks operated from 14 owned and 34 leased locations, with branch offices serving the Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West. The leased locations have remaining lease terms ranging from one to three years, or are leased on a month to month basis.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed3 unchanged
Biggest changeThere were no shares of common stock repurchased during the twelve months ended December 31, 2022 and 2021. As of December 31, 2022, 1,309,805 shares remain authorized for repurchase under the Repurchase Plan.
Biggest changeThere were no shares of common stock repurchased during the twelve months ended December 31, 2023 and 2022. As of December 31, 2023, 1,309,805 shares remain authorized for repurchase under the Repurchase Plan.
In August 2015, the Company’s Board of Directors authorized the Company to - 27 - repurchase 2,000,000 shares of the Company's outstanding common stock (the “Repurchase Plan”). The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management’s discretion.
In August 2015, the Company’s Board of Directors authorized the Company to - 31 - repurchase 2,000,000 shares of the Company's outstanding common stock (the “Repurchase Plan”). The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management’s discretion.
As of February 22, 2023, the Company's common stock was held by approximately 43 shareholders of record, which does not include shareholders whose shares are held in street or nominee name. The Company believes that when holders in street or nominee name are added, the number of holders of the Company's common stock exceeds 500.
As of February 21, 2024, the Company's common stock was held by approximately 45 shareholders of record, which does not include shareholders whose shares are held in street or nominee name. The Company believes that when holders in street or nominee name are added, the number of holders of the Company's common stock exceeds 500.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

104 edited+40 added−38 removed82 unchanged
Biggest changeThe Company will continue to actively monitor the situation and may take further actions that alter its business operations as may be required by federal, state or local authorities or that the Company determines are in the best interests of employees, customers and shareholders. - 30 - Percentage of Revenue Table The following table sets forth for the periods indicated the results of operations as a percentage of the Company’s total revenues and the percentage of changes in the amount of such of items as compared to the amount in the indicated prior period: Percent of Total Revenues Percent Change Three Years Year Ended December 31, 2022 over 2021 over 2022–2020 2022 2021 2020 2021 2020 Revenues Rental 62 % 62 % 63 % 61 % 17 % 11 % Rental related services 17 17 16 17 25 6 Rental operations 79 79 79 78 19 10 Sales 20 20 20 22 20 1 Other 1 1 1 — 28 (6 ) Total revenues 100 100 100 100 19 8 Costs and expenses Direct costs of rental operations Depreciation of rental equipment 14 13 15 15 5 7 Rental related services 12 12 12 12 21 9 Other 15 16 15 13 28 23 Total direct costs of rental operations 41 41 42 40 18 13 Cost of sales 13 13 13 14 19 (3 ) Total costs 54 54 55 54 18 9 Gross profit 46 46 45 46 20 7 Selling and administrative expenses 23 23 24 21 15 21 Income from operations 23 23 21 25 25 (6 ) Other expense: Interest expense 2 2 2 2 45 19 Income before provision for income taxes 21 20 20 23 23 (8 ) Provision for income taxes 5 5 5 5 9 7 Net income 16 % 16 % 15 % 18 % 28 % (12 )% - 31 - Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021 Overview Consolidated revenues in 2022 increased to $733.8 million from $616.8 million in 2021.
Biggest changeDividends In February 2024, the Company announced that its Board of Directors declared a cash dividend of $0.475 per common share for the quarter ending March 31, 2024, an increase of 2% over the prior year’s comparable quarter. - 34 - Percentage of Revenue Table The following table sets forth for the periods indicated the results of operations as a percentage of the Company’s total revenues from continuing operations and the percentage of changes in the amount of such items as compared to the amount in the indicated prior period: Percent of Total Revenues Percent Change Three Years Year Ended December 31, 2023 over 2022 over 2023–2021 2023 2022 2021 2022 2021 Revenues Rental 60 % 57 % 61 % 62 % 22 % 17 % Rental related services 16 17 15 14 45 26 Rental operations 76 74 76 76 26 18 Sales 23 25 23 23 40 21 Other 1 1 1 1 267 7 Total revenues 100 100 100 100 31 19 Costs and expenses Direct costs of rental operations Depreciation of rental equipment 12 11 13 14 11 7 Rental related services 11 12 11 10 40 24 Other 15 13 16 15 10 31 Total direct costs of rental operations 38 36 40 39 18 20 Cost of sales 15 17 14 14 50 20 Total costs 53 53 54 53 27 20 Gross profit 47 47 46 47 36 17 Selling and administrative expenses 24 25 22 23 45 16 Other income — — — — 100 0 Income from operations 23 23 24 24 29 19 Interest expense 3 5 2 2 232 48 Income from continuing operations before provision for income taxes 20 18 22 22 11 16 Provision for income taxes from continuing operations 5 5 5 6 20 2 Income from continuing operations 15 % 13 % 17 % 16 % 8 % 21 % 1.
Mobile Modular – 2022 compared to 2021 (dollar amounts in thousands) Year Ended December 31, Increase (Decrease) 2022 2021 $ % Revenues Rental $ 268,288 $ 220,569 $ 47,719 22 % Rental related services 91,851 72,330 19,521 27 % Rental operations 360,139 292,899 67,240 23 % Sales 99,979 68,982 30,997 45 % Other 1,599 1,435 164 11 % Total revenues 461,717 363,316 98,401 27 % Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 31,172 28,071 3,101 11 % Rental related services 66,254 53,018 13,236 25 % Other 83,031 60,429 22,602 37 % Total direct costs of rental operations 180,457 141,518 38,939 28 % Costs of sales 64,073 45,758 18,315 40 % Total costs of revenues 244,530 187,276 57,254 31 % Gross Profit Rental 154,085 132,070 22,015 17 % Rental related services 25,597 19,310 6,287 33 % Rental operations 179,682 151,380 28,302 19 % Sales 35,906 23,225 12,681 55 % Other 1,599 1,435 164 11 % Total gross profit 217,187 176,040 41,147 23 % Selling and administrative expenses 110,234 92,603 17,631 19 % Income from operations 106,953 83,436 23,517 28 % Interest expense allocation (10,175 ) (6,433 ) 3,742 58 % Pre-tax income $ 96,778 $ 77,003 $ 19,775 26 % Other Selected Information Adjusted EBITDA 5 $ 159,224 $ 130,089 $ 29,135 22 % Average rental equipment 1 $ 1,025,637 $ 925,951 $ 99,686 11 % Average rental equipment on rent $ 811,693 $ 705,577 $ 106,116 15 % Average monthly total yield 2 2.18 % 1.99 % 10 % Average utilization 3 79.1 % 76.2 % 4 % Average monthly rental rate 4 2.75 % 2.61 % 5 % Period end rental equipment 1 $ 1,054,845 $ 1,001,165 $ 53,680 5 % Period end utilization 3 80.7 % 76.4 % 6 % 1.
Mobile Modular – 2022 compared to 2021 (dollar amounts in thousands) Year Ended December 31, Increase (Decrease) 2022 2021 $ % Revenues Rental $ 268,288 $ 220,569 $ 47,719 22 % Rental related services 91,851 72,330 19,521 27 % Rental operations 360,139 292,899 67,240 23 % Sales 99,979 68,982 30,997 45 % Other 1,599 1,435 164 11 % Total revenues 461,717 363,316 98,401 27 % Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 31,172 28,071 3,101 11 % Rental related services 66,254 53,018 13,236 25 % Other 83,031 60,429 22,602 37 % Total direct costs of rental operations 180,457 141,518 38,939 28 % Costs of sales 64,073 45,758 18,315 40 % Total costs of revenues 244,530 187,276 57,254 31 % Gross Profit Rental 154,085 132,070 22,015 17 % Rental related services 25,597 19,310 6,287 33 % Rental operations 179,682 151,380 28,302 19 % Sales 35,906 23,225 12,681 55 % Other 1,599 1,435 164 11 % Total gross profit 217,187 176,040 41,147 23 % Selling and administrative expenses (110,234 ) (92,603 ) 17,631 19 % Income from operations 106,953 83,436 23,517 28 % Interest expense allocation (10,175 ) (6,433 ) 3,742 58 % Pre-tax income $ 96,778 $ 77,003 $ 19,775 26 % Other Selected Information Adjusted EBITDA $ 159,224 $ 130,089 $ 29,135 22 % Average rental equipment 1 $ 1,025,637 $ 925,951 $ 99,686 11 % Average rental equipment on rent $ 811,693 $ 705,577 $ 106,116 15 % Average monthly total yield 2 2.18 % 1.99 % 10 % Average utilization 3 79.1 % 76.2 % 4 % Average monthly rental rate 4 2.75 % 2.61 % 5 % Period end rental equipment 1 $ 1,054,845 $ 1,001,165 $ 53,680 5 % Period end utilization 3 80.7 % 76.4 % 6 % 1.
TRS-RenTelco – 2022 compared to 2021 (dollar amounts in thousands) Year Ended December 31, Increase (Decrease) 2022 2021 $ % Revenues Rental $ 121,375 $ 113,419 $ 7,956 7 % Rental related services 3,112 2,880 232 8 % Rental operations 124,487 116,299 8,188 7 % Sales 24,571 22,242 2,329 10 % Other 1,720 1,653 67 4 % Total revenues 150,778 140,194 10,584 8 % Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 49,253 47,374 1,879 4 % Rental related services 2,592 2,704 (112 ) (4 )% Other 21,327 19,148 2,179 11 % Total direct costs of rental operations 73,172 69,226 3,946 6 % Costs of sales 9,707 9,574 133 1 % Total costs of revenues 82,879 78,800 4,079 5 % Gross Profit Rental 50,795 46,897 3,898 8 % Rental related services 520 176 344 nm Rental operations 51,315 47,073 4,242 9 % Sales 14,864 12,667 2,197 17 % Other 1,720 1,653 67 4 % Total gross profit 67,899 61,394 6,505 11 % Selling and administrative expenses 27,245 25,152 2,093 8 % Income from operations 40,654 36,243 4,411 12 % Interest expense allocation (3,294 ) (2,270 ) 1,024 45 % Foreign currency exchange loss (378 ) (210 ) (168 ) nm Pre-tax income $ 36,982 $ 33,763 $ 3,219 10 % Other Selected Information Adjusted EBITDA 5 $ 92,007 $ 85,723 $ 6,284 7 % Average rental equipment 1 $ 383,235 $ 351,895 $ 31,340 9 % Average rental equipment on rent $ 245,893 $ 235,773 $ 10,120 4 % Average monthly total yield 2 2.63 % 2.69 % (2 )% Average utilization 3 64.2 % 67.0 % (4 )% Average monthly rental rate 4 4.11 % 4.01 % 2 % Period end rental equipment 1 $ 395,214 $ 361,130 $ 34,084 9 % Period end utilization 3 59.4 % 62.9 % (6 )% 1.
TRS-RenTelco – 2022 compared to 2021 (dollar amounts in thousands) Year Ended December 31, Increase (Decrease) 2022 2021 $ % Revenues Rental $ 121,375 $ 113,419 $ 7,956 7 % Rental related services 3,112 2,880 232 8 % Rental operations 124,487 116,299 8,188 7 % Sales 24,571 22,242 2,329 10 % Other 1,720 1,653 67 4 % Total revenues 150,778 140,194 10,584 8 % Costs and Expenses Direct costs of rental operations: Depreciation of rental equipment 49,253 47,374 1,879 4 % Rental related services 2,592 2,704 (112 ) (4 )% Other 21,327 19,148 2,179 11 % Total direct costs of rental operations 73,172 69,226 3,946 6 % Costs of sales 9,707 9,574 133 1 % Total costs of revenues 82,879 78,800 4,079 5 % Gross Profit Rental 50,795 46,897 3,898 8 % Rental related services 520 176 344 nm Rental operations 51,315 47,073 4,242 9 % Sales 14,864 12,667 2,197 17 % Other 1,720 1,653 67 4 % Total gross profit 67,899 61,394 6,505 11 % Selling and administrative expenses (27,245 ) (25,152 ) 2,093 8 % Income from operations 40,654 36,243 4,411 12 % Interest expense allocation (3,294 ) (2,270 ) 1,024 45 % Foreign currency exchange loss (378 ) (210 ) (168 ) nm Pre-tax income $ 36,982 $ 33,763 $ 3,219 10 % Other Selected Information Adjusted EBITDA $ 92,007 $ 85,723 $ 6,284 7 % Average rental equipment 1 $ 383,235 $ 351,895 $ 31,340 9 % Average rental equipment on rent $ 245,893 $ 235,773 $ 10,120 4 % Average monthly total yield 2 2.63 % 2.69 % (2 )% Average utilization 3 64.2 % 67.0 % (4 )% Average monthly rental rate 4 4.11 % 4.01 % 2 % Period end rental equipment 1 $ 395,214 $ 361,130 $ 34,084 9 % Period end utilization 3 59.4 % 62.9 % (6 )% 1.
Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment. 4.
Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment. 4.
Adjusted EBITDA is a non-GAAP financial measure and is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs.
Adjusted EBITDA is a non-GAAP financial measure and is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs.
Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment. 4.
Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment. 4.
Sales occur routinely as a normal part of Mobile Modular’s rental business; however, these sales can fluctuate from period to period depending on customer requirements, equipment availability and funding.
Sales occur routinely as a normal part of Mobile Modular’s rental business; however, these sales can fluctuate from period to period depending on customer requirements, equipment availability and funding.
Sales occur routinely as a normal part of TRS-RenTelco’s rental business; however, these sales and related gross margins can fluctuate from period to period depending on customer requirements, equipment availability and funding.
Sales occur routinely as a normal part of TRS-RenTelco’s rental business; however, these sales and related gross margins can fluctuate from period to period depending on customer requirements, equipment availability and funding.
Adjusted EBITDA is a component of two restrictive financial covenants for the Company’s unsecured Credit Facility, the Note Purchase Agreement, Series D Senior Notes and Series E Senior Notes (as defined and more fully described under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”).
Adjusted EBITDA is a component of two restrictive financial covenants for the Company’s unsecured Credit Facility, the Note Purchase Agreement, Series D Senior Notes, Series E Senior Notes and Series F Senior Notes (as defined and more fully described under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”).
These results are discussed on a segment basis below. Pre-tax income contribution by Enviroplex was 1% and 4% in 2022 and 2021, respectively. • The provision for income taxes resulted in an effective tax rate of 23.2% and 26.3% for the twelve months ended December 31, 2022 and 2021, respectively.
These results are discussed on a segment basis below. Pre-tax income contribution by Enviroplex was 1% and 4% in 2022 and 2021, respectively. • The provision for income taxes resulted in an effective tax rate of 23.3% and 26.3% for the twelve months ended December 31, 2022 and 2021, respectively.
The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact the Company’s financial results in periods subsequent - 51 - to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future.
The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact the Company’s financial results in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future.
Shelf Notes may be issued and sold from time to time at the discretion of the Company’s Board of Directors and in such amounts as the Board of Directors may determine, subject to prospective purchasers’ agreement to purchase the Shelf Notes. The Company will sell the Shelf Notes directly to such purchasers.
Shelf Notes may be issued and sold from time to time at the discretion of the Company’s Board of Directors and in such amounts as the Board of Directors may determine, subject to prospective purchasers’ agreement to purchase the Shelf Notes. The Company will sell the Shelf Notes directly to such - 51 - purchasers.
Among other restrictions, the Note Purchase Agreement, which has superseded in its entirety the Prior NPA, under which the Series C Senior Notes, Series D Senior Notes and Series E Senior Notes were sold, contains financial covenants requiring the Company to not (all defined terms used below not otherwise defined herein have the meaning assigned to such terms in the Note Purchase Agreement): • Permit the Consolidated Fixed Charge Coverage Ratio of EBITDA (as defined in the Note Purchase Agreement) to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1.
Among other restrictions, the Note Purchase Agreement, which has superseded in its entirety the Prior NPA, under which the Series D Senior Notes, Series E Senior Notes and Series F Senior Notes were sold, contains financial covenants requiring the Company to not (all defined terms used below not otherwise defined herein have the meaning assigned to such terms in the Note Purchase Agreement): • Permit the Consolidated Fixed Charge Coverage Ratio of EBITDA (as defined in the Note Purchase Agreement) to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1.
At December 31, 2022, the principal balance outstanding under the Series D Senior Notes was $40.0 million. 2.35% Senior Notes Due in 2026 On June 16, 2021, the Company issued and sold to the purchasers $60 million aggregate principal amount of 2.35% Series E Notes (the "Series E Notes") pursuant to the terms of the Amended and Restated Note Purchase and Private Shelf Agreement, dated March 31, 2020 (the “Note Purchase Agreement”), among the Company, PGIM, Inc. and the noteholders party thereto.
At December 31, 2023, the principal balance outstanding under the Series D Senior Notes was $40.0 million. 2.35% Senior Notes Due in 2026 On June 16, 2021, the Company issued and sold to the purchasers $60 million aggregate principal amount of 2.35% Series E Notes (the "Series E Notes") pursuant to the terms of the Amended and Restated Note Purchase and Private Shelf Agreement, dated March 31, 2020 (the “Note Purchase Agreement”), among the Company, PGIM, Inc. and the noteholders party thereto.
In addition, pursuant to the Note Purchase Agreement, the Company may authorize the issuance and sale of additional senior notes (the “Shelf Notes”) in the aggregate principal amount of (x) $250 million minus (y) the amount of other notes (such as the Series D Senior Notes and Series E Senior Notes, each defined below) then outstanding, to be dated the date of issuance thereof, to mature, in case of each Shelf Note so issued, no more than 15 years after the date of original issuance thereof, to have an average life, in the case of each Shelf Note so issued, of no more than 15 years after the date of original issuance thereof, to bear interest on the unpaid balance thereof from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Shelf Note so issued, in accordance with the Note Purchase Agreement.
In addition, pursuant to the Note Purchase Agreement, the Company may authorize the issuance and sale of additional senior notes (the “Shelf Notes”) in the aggregate principal amount of (x) $300 million minus (y) the amount of other notes (such as the Series D Senior Notes, Series E Senior Notes and Series F Senior Notes, each defined below) then outstanding, to be dated the date of issuance thereof, to mature, in case of each Shelf Note so issued, no more than 15 years after the date of original issuance thereof, to have an average life, in the case of each Shelf Note so issued, of no more than 15 years after the date of original issuance thereof, to bear interest on the unpaid balance thereof from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Shelf Note so issued, in accordance with the Note Purchase Agreement.
For 2022, Mobile Modular’s selling and administrative expenses increased $17.6 million, or 19%, to $110.2 million, primarily due to $8.2 million higher allocated corporate expenses, increased employee salaries and benefit costs totaling $6.0 million, and $2.8 million higher marketing and administrative costs, compared to 2021. - 34 - TRS-RenTelco For 2022, TRS-RenTelco’s total revenues increased $10.6 million, or 8%, to $150.8 million compared to 2021, primarily due to higher rental and sales revenues.
For 2022, Mobile Modular’s selling and administrative expenses increased $17.6 million, or 19%, to $110.2 million, primarily due to $8.2 million higher allocated corporate expenses, increased employee salaries and benefit costs totaling $6.0 million, and $2.8 million higher marketing and administrative costs, compared to 2021. - 45 - TRS-RenTelco For 2022, TRS-RenTelco’s total revenues increased $10.6 million, or 8%, to $150.8 million compared to 2021, primarily due to higher rental and sales revenues.
There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, though, significant deterioration in our financial performance could impact the Company's ability to comply with these covenants. - 47 - Liquidity and Capital Resources The Company’s rental businesses are capital intensive and generate significant cash flows.
There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, though, significant deterioration in our financial performance could impact the Company's ability to comply with these covenants. - 49 - Liquidity and Capital Resources The Company’s rental businesses are capital intensive and generate significant cash flows.
At December 31, 2022, the Company was in compliance with each of the aforementioned covenants. There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, although significant deterioration in our financial performance could impact the Company’s ability to comply with these covenants.
At December 31, 2023, the Company was in compliance with each of the aforementioned covenants. There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, although significant deterioration in our financial performance could impact the Company’s ability to comply with these covenants.
At December 31, 2022, the Company was in compliance with each of the aforementioned covenants. There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, although significant deterioration in our financial performance could impact the Company’s ability to comply with these covenants.
At December 31, 2023, the Company was in compliance with each of the aforementioned covenants. There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, although significant deterioration in our financial performance could impact the Company’s ability to comply with these covenants.
The principal balance is due when the notes mature on June 16, 2026. The full net proceeds from the Series E Senior Notes were used to pay down the Company’s credit facility. At December 31, 2022, the principal balance outstanding under the Series E Senior Notes was $60.0 million.
The principal balance is due when the notes mature on June 16, 2026. The full net proceeds from the Series E Senior Notes were used to pay down the Company’s credit facility. At December 31, 2023, the principal balance outstanding under the Series E Senior Notes was $60.0 million.
Please see the Company's Consolidated Statements of Cash Flows on page 62 for a more detailed presentation of the sources and uses of the Company's cash. Critical Accounting Policies The Company prepares its consolidated financial statements in accordance with GAAP. A summary of the Company’s significant accounting policies are in Note 1 to the Company’s consolidated financial statements.
Please see the Company's Consolidated Statements of Cash Flows on page 65 for a more detailed presentation of the sources and uses of the Company's cash. Critical Accounting Policies The Company prepares its consolidated financial statements in accordance with GAAP. A summary of the Company’s significant accounting policies are in Note 1 to the Company’s consolidated financial statements.
In 2022, 2021 and 2020 the Company performed qualitative assessments taking into consideration the market value of the Company, any changes in management, key personnel, strategy and any relevant macroeconomic conditions, concluding that the fair value of the reporting units substantially exceeded the respective reporting units carrying value, including goodwill.
In 2023, 2022 and 2021 the Company performed qualitative assessments taking into consideration the market value of the Company, any changes in management, key personnel, strategy and any relevant macroeconomic conditions, concluding that the fair value of the reporting units substantially exceeded the respective reporting units carrying value, including goodwill.
The Company determined its critical accounting policies by considering those policies that involve the most complex or subjective assumptions, estimates, and/or judgement. Material changes in these assumptions, estimates or judgments could have the potential to have a material impact on the Company’s financial results.
The Company determined its critical accounting policies by considering those policies that involve the most complex or subjective assumptions, estimates, and/or judgment. Material changes in these assumptions, estimates or judgments could have the potential to have a material impact on the Company’s financial results.
Average and Period end rental equipment represents the cost of rental equipment excluding accessory equipment. 2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 3.
Average and Period end rental equipment represents the cost of rental equipment excluding new equipment inventory and accessory equipment. 2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 3.
Average and Period end rental equipment represents the cost of rental equipment excluding accessory equipment. 2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 3.
Average and Period end rental equipment represents the cost of rental equipment excluding new inventory and accessory equipment. 2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 3.
Average and Period end rental equipment represents the cost of rental equipment excluding accessory equipment. 2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 3.
Average and Period end rental equipment represents the cost of rental equipment excluding new inventory and accessory equipment. 2. Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period. 3.
A reconciliation of Adjusted EBITDA to net cash provided by operating activities and net income to Adjusted EBITDA can be found on page 46. - 32 - Mobile Modular For 2022, Mobile Modular’s total revenues increased $98.4 million, or 27%, to $461.7 million compared to 2021, primarily due to higher rental, sales and rental related services revenues.
A reconciliation of Adjusted EBITDA to net cash provided by operating activities and net income to Adjusted EBITDA can be found on page 48. - 43 - Mobile Modular For 2022, Mobile Modular’s total revenues increased $98.4 million, or 27%, to $461.7 million compared to 2021, primarily due to higher rental, sales and rental related services revenues.
The table below provides a summary of the Company’s contractual obligations and reflects expected payments due as of December 31, 2022 and does not reflect changes that could arise after that date.
The table - 52 - below provides a summary of the Company’s contractual obligations and reflects expected payments due as of December 31, 2023 and does not reflect changes that could arise after that date.
Contractual Obligations and Commitments At December 31, 2022, the Company’s material contractual obligations and commitments consisted of outstanding borrowings under our credit facilities expiring in 2027, outstanding amounts under our 2.35% and 2.57% senior notes due in 2026 and 2028, respectively, and operating leases for facilities. The operating lease amounts exclude property taxes and insurance.
Contractual Obligations and Commitments At December 31, 2023, the Company’s material contractual obligations and commitments consisted of outstanding borrowings under our credit facilities expiring in 2027, outstanding amounts under our 2.35%, 2.57% and 6.25% senior notes due in 2026, 2028 and 2030, respectively, and operating leases for facilities. The operating lease amounts exclude property taxes and insurance.
Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment. 4.
Period end utilization is calculated by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding new equipment inventory and accessory equipment. Average utilization for the period is calculated using the average month end costs of the rental equipment. 4.
(“PGIM”) and the holders of Series B and Series C Notes previously issued pursuant to the Prior NPA, among the Company and the other parties to the Note Purchase Agreement. The Note Purchase Agreement amended and restated, and superseded in its entirety, the Prior NPA.
(“PGIM”) and the holders of Series D and Series E Notes previously issued pursuant to the Prior Amended and Restated NPA, among the Company and the other parties to the Note Purchase Agreement. The Note Purchase Agreement amended and restated, and superseded in its entirety, the Prior NPA.
At December 31, 2022, the actual ratio was 4.27 to 1. • Permit the Consolidated Leverage Ratio of funded debt (as defined in the Credit Facility and the Note Purchase Agreement) to Adjusted EBITDA at any time during any period of four consecutive quarters to be greater than 2.75 to 1.
At December 31, 2023, the actual ratio was 3.33 to 1. • Permit the Consolidated Leverage Ratio of funded debt (as defined in the Credit Facility and the Note Purchase Agreement) to Adjusted EBITDA at any time during any period of four consecutive quarters to be greater than 2.75 to 1.
The Company had other capital expenditures for property, plant and equipment of $17.6 million in 2022, $2.7 million in 2021 and $13.7 million in 2020, and has used cash to provide returns to its shareholders in the form of cash dividends.
The Company had other capital expenditures for property, plant and equipment of $44.0 million in 2023, $17.6 million in 2022 and $2.7 million in 2021, and has used cash to provide returns to its shareholders in the form of cash dividends.
At December 31, 2022, under the Credit Facility and Sweep Service Facility, the Company had unsecured lines of credit that permit it to borrow up to $650.0 million of which $313.8 million was outstanding.
At December 31, 2023, under the Credit Facility and Sweep Service Facility, the Company had unsecured lines of credit that permit it to borrow up to $650.0 million of which $588.0 million was outstanding.
Financial Statements and Supplementary Data.” Results of Operations General The Company, incorporated in 1979, is a leading rental provider of relocatable modular buildings for classroom and office space, electronic test equipment for general purpose and communications needs, and liquid and solid containment tanks and boxes. The Company’s primary emphasis is on equipment rentals.
Financial Statements and Supplementary Data.” Results of Operations General The Company, incorporated in 1979, is a leading rental provider of relocatable modular buildings for classroom and office space, portable storage containers, and electronic test equipment for general purpose and communications needs. The Company’s primary emphasis is on equipment rentals.
At December 31, 2022, the actual ratio was 4.27 to 1. • Permit the Consolidated Leverage Ratio of funded debt to EBITDA (as defined in the Note Purchase Agreement) at any time during any period of four consecutive quarters to be greater than 2.75 to 1. At December 31, 2022, the actual ratio was 1.43 to 1.
At December 31, 2023, the actual ratio was 3.33 to 1. • Permit the Consolidated Leverage Ratio of funded debt to EBITDA (as defined in the Note Purchase Agreement) at any time during any period of four consecutive quarters to be greater than 2.75 to 1. At December 31, 2023, the actual ratio was 2.34 to 1.
At December 31, 2022 the Company was comprised of four reportable business segments: (1) its modular building and portable storage container rental segment (“Mobile Modular”); (2) its electronic test equipment rental segment (“TRS-RenTelco”); (3) its containment solutions for the storage of hazardous and non-hazardous liquids and solids segment (“Adler Tanks”); and (4) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”).
At December 31, 2023 the Company was comprised of four reportable business segments: (1) its modular building rental segment (“Mobile Modular”); (2) its portable storage container rental segment ("Portable Storage"); (3) its electronic test equipment rental segment (“TRS-RenTelco”); and (4) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”).
(For more information, see “Item 1. Business – Relocatable Modular Buildings – Classroom Rentals and Sales to Public Schools (K-12)” above.) Selling and administrative expenses primarily include personnel and benefit costs, which includes share-based compensation, depreciation and amortization of property, plant and equipment and intangible assets, bad debt expense, advertising costs, and professional service fees.
Business – Relocatable Modular Buildings – Classroom Rentals and Sales to Public Schools (K-12)” above.) Selling and administrative expenses primarily include personnel and benefit costs, which includes share-based compensation, depreciation and amortization of property, plant and equipment and intangible assets, credit losses, advertising costs, and professional service fees.
At December 31, 2022, the actual ratio was 4.27 to 1. • Permit the Consolidated Leverage Ratio of funded debt to EBITDA at any time during any period of four consecutive fiscal quarters to be greater than 2.75 to 1. At December 31, 2022, the actual ratio was 1.43 to 1.
At December 31, 2023, the actual ratio was 3.33 to 1. • Permit the Consolidated Leverage Ratio of funded debt to EBITDA at any time during any period of four consecutive fiscal quarters to be greater than 2.75 to 1. At December 31, 2023, the actual ratio was 2.34 to 1.
At December 31, 2022, the actual ratio was 1.43 to 1. At December 31, 2022, the Company was in compliance with each of these aforementioned covenants.
At December 31, 2023, the actual ratio was 2.34 to 1. At December 31, 2023, the Company was in compliance with each of these aforementioned covenants.
Enviroplex’s gross profit decreased $4.8 million, or 48%, primarily due to $7.9 million lower sales revenues and lower gross margins of 22.1% compared to 31.8% in 2021. • Selling and administrative expenses increased $22.7 million, or 15%, to $171.3 million, primarily due to increased headcount and employees’ salaries and benefit costs totaling $12.1 million and $10.0 million higher marketing and administrative costs. • Interest expense increased $4.7 million, or 45%, due to 15% higher average debt levels of the Company, accompanied by 26% higher net average interest rates of 3.55% in 2022 compared to 2.81% in 2021. • Pre-tax income contribution was 64%, 25% and 10% by Mobile Modular, TRS-RenTelco and Adler Tanks, respectively, in 2022, compared to 63%, 28% and 5%, respectively, in 2021.
Enviroplex’s gross profit decreased $4.8 million, or 48%, primarily due to $7.9 million lower sales revenues and lower gross margins of 22.1% compared to 31.8% in 2021. • Selling and administrative expenses increased $19.9 million, or 16%, to $142.9 million, primarily due to increased headcount and employees’ salaries and benefit costs totaling $11.2 million and $9.3 million higher marketing and administrative costs. • Interest expense increased $4.0 million, or 48%, due to 15% higher average debt levels of the Company, accompanied by 26% higher net average interest rates of 3.55% in 2022 compared to 2.81% in 2021. • Pre-tax income contribution in 2022 was 72% and 27% by Mobile Modular and TRS-RenTelco, respectively, compared to 66% and 29%, respectively, in 2021.
Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned. Rental related services revenues are primarily associated with relocatable modular building and liquid and solid containment tanks and boxes leases.
Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned. Rental related services revenues are primarily associated with relocatable modular building and portable storage container leases.
Cash flows for the Company in 2022 as compared to 2021 are summarized as follows: Cash Flows from Operating Activities: The Company’s operations provided net cash flow of $194.4 million for 2022 as compared to $195.7 million in 2021.
Cash flows for the Company in 2023 as compared to 2022 are summarized as follows: Cash Flows from Operating Activities: The Company’s operations provided net cash flows of $95.3 million for 2023, compared to $194.4 million in 2022.
The Company paid cash dividends of $44.3 million, $42.2 million and $39.8 million in the years ended December 31, 2022, 2021 and 2020, respectively.
The Company paid cash dividends of $45.6 million, $44.3 million and $42.2 million in the years ended December 31, 2023, 2022 and 2021, respectively.
For 2021, Adler Tanks’ selling and administrative expenses increased $0.8 million, or 3%, to $25.5 million, primarily due to higher salaries and employee benefit costs and higher corporate allocated expenses. - 45 - Adjusted EBITDA To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs.
For 2022, TRS-RenTelco’s selling and administrative expenses increased $2.1 million, or 8%, to $27.2 million, primarily due to $0.9 million higher allocated corporate expenses and an increase of $0.7 million in marketing and administrative expenses, compared to 2021. - 47 - Adjusted EBITDA To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs, share-based compensation and transaction costs.
As of December 31, 2022, 1,309,805 shares remain authorized for repurchase under the Repurchase Plan. - 48 - Unsecured Revolving Lines of Credit On July 15, 2022, the Company entered into an amended and restated credit agreement with Bank of America, N.A., as Administrative Agent, Swing Line Lender, L/C Issuer and lender, and other lenders named therein (the “Credit Facility”).
Unsecured Revolving Lines of Credit On July 15, 2022, the Company entered into an amended and restated credit agreement with Bank of America, N.A., as Administrative Agent, Swing Line Lender, L/C Issuer and lender, and other lenders named therein (the “Credit Facility”).
For 2022 compared to 2021, on a consolidated basis: • Gross profit increased $55.9 million, or 20%, to $336.9 million. Mobile Modular’s gross profit increased $41.1 million, or 23%, due to higher gross profit on rental, sales and rental related services revenues.
For 2022 compared to 2021, on a consolidated basis from continuing operations: • Gross profit increased $42.9 million, or 17%, to $290.2 million. Mobile Modular’s gross profit increased $41.1 million, or 23%, due to higher gross profit on rental, sales and rental related services revenues.
The lower rate in 2022 was primarily due to decreased business activity levels in higher tax rate states. • Adjusted EBITDA increased $40.2 million, or 16%, to $288.9 million in 2022.
The lower rate in 2022 was primarily due to decreased business activity levels in higher tax rate states. • Adjusted EBITDA increased $30.6 million, or 14%, to $251.2 million in 2022.
Higher gross profit on rental, rental related services and other revenues, partly offset by an increase in selling and administrative expenses, resulted in a $9.4 million increase in pre-tax income to $15.3 million in 2022, compared to 2021. The following table summarizes year-to-year results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.
Higher gross profit on rental, rental related services and sales revenues, partly offset by $7.1 million higher selling and administrative expenses, resulted in an increase in pre-tax income of $3.5 million, or 12%, to $32.9 million in 2023. The following table summarizes year-to-year results for each revenue and gross profit category, income from operations, pre-tax income, and other selected information.
These results are discussed on a segment basis below. Pre-tax income contribution by Enviroplex was 4% and 6% in 2021 and 2020, respectively. • The provision for income taxes resulted in an effective tax rate of 26.3% and 22.8% for the twelve months ended December 31, 2021 and 2020, respectively.
These results are discussed on a segment basis below. Pre-tax income contribution by Enviroplex was 0% for 2023 and 1% for 2022. • The provision for income taxes resulted in an effective tax rate of 25.5% and 23.3% for the twelve months ended December 31, 2023 and 2022, respectively.
TRS-RenTelco’s gross profit increased $6.5 million, or 11%, primarily due to higher gross profit on rental and sales revenues. Adler Tanks’ gross profit increased $13.0 million, or 39%, primarily attributed to higher gross profit on rental and rental related services revenues.
TRS-RenTelco’s gross profit increased $6.5 million, or 11%, primarily due to higher gross profit on rental and sales revenues.
The full net proceeds of each Shelf Note will be used in the manner described in the applicable Request for Purchase with respect to such Shelf Note. 2.57% Senior Notes Due in 2028 - 49 - On March 17, 2021, the Company issued and sold to the purchasers $40 million aggregate principal amount of 2.57% Series D Notes (the “Series D Senior Notes”) pursuant to the terms of the Amended and Restated Note Purchase and Private Shelf Agreement, dated March 31, 2020 (the “Note Purchase Agreement”), among the Company, PGIM, Inc. and the noteholders party thereto.
The full net proceeds of each Shelf Note will be used in the manner described in the applicable Request for Purchase with respect to such Shelf Note. 6.25% Senior Notes Due in 2030 On September 27, 2023, the Company issued and sold to the purchasers $75.0 million aggregate principal amount of 6.25% Series F Notes (the “Series F Senior Notes”) pursuant to the terms of the Second Amended and Restated Note Purchase and Private Shelf Agreement, dated June 8, 2023 (the “Note Purchase Agreement”), among the Company, PGIM, Inc. and the noteholders party thereto.
During the year ended December 31, 2021, the Company transacted a total of $292.2 million in acquisition related costs. There were no acquisitions of businesses completed during 2022.
During the year ended December 31, 2023, the Company transacted a total of $462.1 million in acquisition related costs. There were no acquisition related transactions during the year ended December 31, 2022 and $292.2 million in acquisition related costs during the same period in 2021.
The Company sells modular, electronic test equipment and liquid and solid containment tanks and boxes that are new, or previously rented. The Company’s Enviroplex subsidiary manufactures and sells modular classrooms. The renting and selling of some modular equipment requires a dealer’s license, which the Company has obtained from the appropriate governmental agencies.
The Company’s Enviroplex subsidiary manufactures and sells new modular classrooms. The renting and selling of some modular equipment requires a dealer’s license, which the Company has obtained from the appropriate governmental agencies.
For the year ended December 31, 2022 compared to year ended December 31, 2021: • Gross Profit on Rental Revenues – Rental revenues increased $10.3 million, or 18%, to $66.4 million, due to 15% higher average rental equipment on rent and 3% higher average monthly rental rates in 2022, as compared to 2021.
For the year ended December 31, 2023 compared to the year ended December 31, 2022: • Gross Profit on Rental Revenues – Rental revenues increased $12.3 million, or 20%, due to 11% higher average rental equipment on rent and 8% higher average monthly rental rates in 2023.
A reconciliation of Adjusted EBITDA to net cash provided by operating activities and net income to Adjusted EBITDA can be found on page 46. - 39 - Mobile Modular For 2021, Mobile Modular’s total revenues increased $41.8 million, or 13%, to $363.3 million compared to 2020, primarily due to higher rental, rental related services and sales revenues.
A reconciliation of Adjusted EBITDA to net cash provided by operating activities and net income to Adjusted EBITDA can be found on page 48. - 36 - Mobile Modular For 2023, Mobile Modular’s total revenues increased $183.0 million, or 48%, to $562.2 million compared to 2022, primarily due to higher rental, sales and rental related services revenues.
The Company’s direct costs of rental operations include depreciation of rental equipment, rental related service costs, impairment of rental equipment, and other direct costs of rental operations (which include direct labor, supplies, repairs, insurance, property taxes, license fees and amortization of certain lease costs).
The Company’s direct costs of rental operations include depreciation of rental equipment, rental related service costs, impairment of rental equipment, and other direct costs of rental operations (which include direct labor, supplies, repairs, insurance, property taxes, license fees and amortization of certain lease costs). The Company sells modulars, storage containers and electronic test equipment that are new, or previously rented.
Note Purchase and Private Shelf Agreement On March 31, 2020, the Company entered into an Amended and Restated Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”) with PGIM, Inc.
Note Purchase and Private Shelf Agreement On June 8, 2023, the Company entered into a Second Amended and Restated Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”) with PGIM, Inc.
Pre-tax income decreased $1.3 million, primarily due to lower gross profit on rental and rental related services revenues, and higher selling and administrative expenses, partly offset by higher gross profit on sales revenues. The following table summarizes year-to-year results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.
Pre-tax income decreased $12.3 million, or 33%, to $24.6 million for 2023, primarily due to lower gross profit on rental and sales revenues, coupled with an increase in selling and administrative expenses. The following table summarizes year-to-year results for each revenue and gross profit category, income from operations, pre-tax income, and other selected information.
For the year ended December 31, 2021 compared to the year ended December 31, 2020: • Gross Profit on Rental Revenues – Rental revenues increased $32.0 million, or 17%, due to 11% higher average rental equipment on rent and 6% higher average monthly rental rates.
For the year ended December 31, 2023 compared to the year ended December 31, 2022: • Gross Profit on Rental Revenues – Rental revenues increased $79.5 million, or 39%, due to 30% higher average rental equipment on rent and 6% higher average monthly rental rates in 2023.
As a percentage of rental revenues, depreciation was 24% and 29% in 2022 and 2021, respectively, and other direct costs were 19% in 2022 and 21% in 2021, which resulted in gross margin percentages of 57% in 2022 compared to 50% in 2021.
As a percentage of rental revenues, depreciation was 13% and 14% in 2023 and 2022, respectively, and other direct costs were 30% in 2023 and 37% in 2022, which resulted in gross margin percentage of 57% in 2023, compared to 49% in 2022.
As a percentage of rental revenues, depreciation was 42% in 2021 and 43% in 2020 and other direct costs was 17% in 2021 compared to 16% in 2020, which resulted in gross margin percentage of 41% in 2021 compared to 42% in 2020.
As a percentage of rental revenues, depreciation was 42% and 41% in 2023 and 2022, respectively, and other direct costs were 18% in both 2023 and 2022, which resulted in gross margin percentage of 40% in 2023, compared to 42% in 2022.
The increase in rental related services revenues was primarily attributable to higher amortization of modular building delivery and return delivery and dismantle revenues and increased delivery and return delivery revenues at Portable Storage.
The increase in rental related services revenues was primarily attributable to increased delivery and return delivery revenues.
The higher rental revenues and lower rental margins resulted in gross profit on rental revenues increasing $14.1 million, or 12%, to $132.1 million in 2021. • Gross Profit on Rental Related Services – Rental related services revenues increased $4.8 million, or 7%, compared to 2020.
The higher rental revenues and lower rental margins resulted in gross profit on rental revenues increasing $10.5 million, or 20%, to $63.7 million in 2023. • Gross Profit on Rental Related Services – Rental related services revenues increased $3.4 million, or 20%, compared to 2022.
Most of these service revenues are negotiated with the initial lease and are recognized on a straight-line basis with the associated costs over the initial term of the lease.
Most of these service revenues are negotiated with the initial lease and are recognized on a straight-line basis with the associated costs over the initial term of the lease. The increase in rental related services revenues was primarily attributable to higher delivery, return delivery and dismantle revenues and higher site related services.
There were no shares of common stock repurchased during the twelve months ended December 31, 2022 and 2021.
There were no shares of common stock repurchased during the twelve months - 50 - ended December 31, 2023, 2022 and 2021. As of December 31, 2023, 1,309,805 shares remain authorized for repurchase under the Repurchase Plan.
Funding of Rental Asset Growth (amounts in thousands) Year Ended December 31, Three Year 2022 2021 2020 Totals Cash provided by operating activities $ 194,432 $ 195,743 $ 180,504 $ 570,679 Proceeds from sales of used rental equipment 73,879 57,337 47,052 178,268 Cash available for purchase of rental equipment 268,311 253,080 227,556 748,947 Purchases of rental equipment (187,689 ) (114,145 ) (86,329 ) (388,163 ) Cash available for other purposes $ 80,622 $ 138,935 $ 141,227 $ 360,784 In addition to increasing its rental assets, the Company has periodically made acquisitions of businesses and business assets.
Funding of Rental Asset Growth (amounts in thousands) Year Ended December 31, Three Year 2023 2022 2021 Totals Cash provided by operating activities $ 95,343 $ 194,432 $ 195,743 $ 485,518 Proceeds from sales of used rental equipment 66,168 73,879 57,337 197,384 Proceeds from sale of discontinued operation, net of tax 202,706 — — 202,706 Cash available for purchase of rental equipment 364,217 268,311 253,080 885,608 Purchases of rental equipment (229,679 ) (187,689 ) (114,145 ) (531,513 ) Cash available for other purposes $ 134,538 $ 80,622 $ 138,935 $ 354,095 In addition to increasing its rental assets, the Company has periodically made acquisitions of businesses and business assets.
The higher revenues offset by lower gross margin percentage of 27% in 2021 compared to 28% in 2020 resulted in rental related services gross profit increasing $0.7 million, or 4%, to $19.3 million in 2021. • Gross Profit on Sales – Sales revenues increased $5.1 million, or 8%, primarily due to higher used equipment sales.
The higher revenues coupled with higher gross margin percentage of 9% in 2023, compared to 4% in 2022, resulted in rental related services gross profit increasing $1.2 million to $1.9 million in 2023. • Gross Profit on Sales – Sales revenues increased $1.7 million, or 56%, primarily due to higher used equipment sales.
Sales and other revenues of modulars, electronic test equipment and tanks and boxes have comprised approximately 21% of the Company’s consolidated revenues in 2022 and for the three years ended December 31, 2022. Over the past three years, modulars, electronic test equipment and tanks and boxes comprised approximately 79%, 19% and 2% of sales and other revenues, respectively.
Sales and other revenues of modulars, containers and electronic test equipment have comprised approximately 26% of the Company’s consolidated revenues from continuing operations in 2023 and 24% for the three years ended December 31, 2023. Over the past three years, modulars, containers and electronic test equipment comprised approximately 81%, 3% and 16% of sales and other revenues, respectively.
Significant capital expenditures are required to maintain and grow the Company’s rental assets. During the last three years, the Company has financed its working capital and capital expenditure requirements through cash flows from operations, proceeds from the sale of rental equipment and from borrowings. Sales occur routinely as a normal part of the Company’s rental businesses.
During the last three years, the Company has financed its working capital and capital expenditure requirements through cash flows from operations, proceeds from the sale of rental equipment and from borrowings.
Pursuant to the Prior NPA, the Company issued (i) $40.0 million aggregate principal amount of its 3.68% Series B Senior Notes, which were repaid on March 17, 2021, and (ii) $60.0 million aggregate principal amount of its 3.84% Series C Senior Notes, which were repaid on November 5, 2022, to which the terms of the Note Purchase Agreement shall apply.
Pursuant to the Prior NPA, the Company issued (i) $40.0 million aggregate principal amount of its 2.57% Series D Senior Notes, due March 17, 2028, and (ii) $60.0 million aggregate principal amount of its 2.35% Series E Senior Notes, due June 16, 2026, to which the terms of the Note Purchase Agreement shall apply.
Goodwill is calculated as the excess of the cost of the acquired business over the net of the fair value of the assets acquired and the liabilities assumed.
When appropriate, the Company’s estimates of the fair values of assets and liabilities acquired include assistance from independent third-party valuation firms. Goodwill is calculated as the excess of the cost of the acquired business over the net of the fair value of the assets acquired and the liabilities assumed.
The rental revenues increase was due to 6% higher average rental equipment on rent, partly offset by 2% lower average monthly rental rates. • Gross Profit on Sales – Sales revenues decreased $4.4 million, or 16%, to $22.2 million in 2021.
The reduction in rental revenues was attributed to 7% lower average rental equipment on rent, partly offset by 1% higher average monthly rental rates. • Gross Profit on Sales – Sales revenues increased $2.5 million, or 10%, to $27.1 million in 2023.
The higher rental revenues together with higher rental margins, resulted in gross profit on rental revenues increasing $9.8 million, or 35%, to $37.9 million in 2022. • Gross Profit on Rental Related Services – Rental related services revenues increased $4.8 million, or 21%, compared to 2021.
The higher rental revenues and increased rental margins resulted in gross profit on rental revenues increasing $60.8 million, or 60%, to $161.6 million in 2023. • Gross Profit on Rental Related Services – Rental related services revenues increased $39.8 million, or 53%, compared to 2022.
For the year ended December 31, 2021 compared to the year ended December 31, 2020: • Gross Profit on Rental Revenues – Rental revenues increased $4.3 million, or 4%, to $113.4 million with depreciation expense increasing $0.9 million, or 2%, and other direct costs increasing $2.0 million, or 12%, resulting in an increase in gross profit on rental revenues of $1.4 million, or 3%, in 2021 compared to 2020.
For the year ended December 31, 2023 compared to the year ended December 31, 2022: • Gross Profit on Rental Revenues – Rental revenues decreased $7.1 million, or 6%, to $114.2 million, with depreciation expense decreasing $0.8 million, or 2%, and other direct costs decreasing $0.7 million, or 3%, resulting in a decrease in gross profit on rental revenues of $5.7 million, or 11%, in 2023 compared to 2022.
As a percentage of rental revenues, depreciation was 13% and 12% in 2021 and 2020, respectively, and other direct costs were 27% in 2021 and 25% in 2020, which resulted in gross margin percentage of 60% in 2021 compared to 63% and 2020.
As a percentage of rental revenues, depreciation was 5% and 4% in 2023 and 2022, respectively, and other direct costs were 10% in both 2023 and 2022, which resulted in gross margin percentage of 85% in 2023 compared to 86% in 2022.
The estimated fair values of these intangible assets reflect various assumptions about revenue growth rates, operating margins, projected cash flows, discount rates, customer attrition rates, terminal values, useful lives and other prospective financial information. When appropriate, the Company’s estimates of the fair values of assets and liabilities acquired include assistance from independent third-party valuation firms.
These assets are valued on an excess earnings or income approach based on projected cash flows. The estimated fair values of these intangible assets reflect various assumptions about revenue growth rates, operating margins, projected cash flows, discount rates, customer attrition rates, terminal values, useful lives and other prospective financial information.
For 2022, Adler Tanks’ selling and administrative expenses increased $2.9 million, or 11%, to $28.4 million, due to $1.3 million higher corporate allocated expenses, increased salaries and employee benefit costs totaling $0.9 million and $0.7 million higher marketing and administrative expenses, compared to 2021. - 38 - Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020 Overview Consolidated revenues in 2021 increased to $616.8 million from $572.6 million in 2020.
For 2023, TRS-RenTelco’s selling and administrative expenses increased $3.7 million, or 14%, to $31.0 million, primarily due to $2.6 million higher allocated corporate expenses, which included $1.6 million of allocated transaction costs from the divestiture of Adler Tanks, as compared to 2022. - 42 - Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021 Overview Consolidated revenues in 2022 increased to $733.8 million from $616.8 million in 2021.
The Company’s cost of sales includes the carrying value of the equipment sold and the direct costs associated with the equipment sold such as delivery, installation, modifications and related site work. The rental and sale of modulars to public school districts comprised 19%, 21% and 23% of the Company’s consolidated rental and sales revenues for 2022, 2021 and 2020, respectively.
The Company’s cost of sales includes the carrying value of the equipment sold and the direct costs associated with the equipment sold such as delivery, installation, modifications and related site work.
The higher sales revenues and higher gross margins of 34% in 2021 compared to 28% in 2020, resulted in sales gross profit increasing $5.4 million, or 30%, to $23.2 million in 2021.
The higher sales revenues and lower gross margins of 32% in 2023, compared to 36% in 2022, resulted in sales gross profit increasing $15.4 million, or 44%, to $50.2 million in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest change(dollar amounts in thousands) 2023 2024 2025 2026 2027 Thereafter Total Estimated Fair Value Revolving lines of credit $ — $ — $ — $ — $ 313,775 $ — $ 313,775 $ 313,775 Weighted average interest rate — — — — 3.29 % — 3.29 % 2.35% Series E senior notes due in 2026 $ — $ — $ — $ 60,000 $ — $ — $ 60,000 $ 54,280 Stated interest rate — — — 2.35 % — — 2.35 % 2.57% Series D senior notes due in 2028 $ — $ — $ — $ — $ — $ 40,000 $ 40,000 $ 34,983 Stated interest rate — — — — — 2.57 % 2.57 % The Company formed a wholly owned Canadian subsidiary, TRS-RenTelco Inc., in 2004 in conjunction with the TRS acquisition and a wholly owned Indian subsidiary, TRS-RenTelco India Private Limited, in 2013.
Biggest change(dollar amounts in thousands) 2024 2025 2026 2027 2028 Thereafter Total Estimated Fair Value Revolving lines of credit $ — $ — $ — $ 588,000 $ — $ — $ 588,000 $ 588,000 Weighted average interest rate — — — 6.63 % — — 6.63 % 2.35% Series E senior notes due in 2026 $ — $ — $ 60,000 $ — $ — $ — $ 60,000 $ 55,950 Stated interest rate — — 2.35 % — — — 2.35 % 2.57% Series D senior notes due in 2028 $ — $ — $ — $ — $ 40,000 $ — $ 40,000 $ 35,931 Stated interest rate — — — — 2.57 % — 2.57 % 6.25% Series F senior notes due in 2030 $ 75,000 $ 75,000 $ 77,283 Stated interest rate — — — — — 6.25 % 6.25 % The Company formed a wholly owned Canadian subsidiary, TRS-RenTelco Inc., in 2004 in conjunction with the TRS acquisition and a wholly owned Indian subsidiary, TRS-RenTelco India Private Limited, in 2013.
Weighted average variable rates are based on implied forward rates in the yield curve at December 31, 2022. The estimate of fair value of the Company’s fixed rate debt is based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities.
Weighted average variable rates are based on implied forward rates in the yield curve at December 31, 2023. The estimate of fair value of the Company’s fixed rate debt is based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities.
Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments denominated in foreign currencies. In 2022, the Company experienced minimal impact on net income due to foreign exchange rate fluctuations.
Currently, the Company does not use derivative instruments to hedge its economic exposure with respect to assets, liabilities and firm commitments denominated in foreign currencies. In 2023, the Company experienced minimal impact on net income due to foreign exchange rate fluctuations.
Although there can be no assurances, given the size of the Canadian operations, the Company does not expect future foreign exchange gains and losses to be significant. The Company has no derivative financial instruments that expose the Company to significant market risk. - 53 -
Although there can be no assurances, given the size of the Canadian operations, the Company does not expect future foreign exchange gains and losses to be significant. The Company has no derivative financial instruments that expose the Company to significant market risk. - 55 -
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to cash flow and fair value risk due to changes in interest rates with respect to its 2.35% and 2.57% senior notes due in 2026 and 2028, respectively, and its revolving lines of credit.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to cash flow and fair value risk due to changes in interest rates with respect to its 2.35%, 2.57% and 6.25% senior notes due in 2026, 2028 and 2030, respectively, and its revolving lines of credit.
The table below presents principal cash flows by expected annual maturities, related weighted average interest rates and estimated fair value for the Company’s - 52 - Series E and Series D Senior Notes and the Company’s revolving lines of credit under the Credit Facility and Sweep Service Facility as of December 31, 2022.
The table below presents principal cash flows by expected annual maturities, related weighted average interest rates and estimated fair value for the Company’s Series E, Series D and Series F Senior Notes and the Company’s revolving lines of credit under the Credit Facility and Sweep Service Facility as of December 31, 2023.

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