What changed in this filing

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Item 1. Financial Statements

2023-07-27 compared with 2023-05-04 · 314 added, 133 removed, 712 unchanged (39% of the section changed)

4 unchanged sentences

Results of review of interim financial statements

We have reviewed the accompanying condensed consolidated balance sheet of McGrath RentCorp (a California Corporation) and subsidiaries (the “Company”) as of March 31, 2023, and the related condensed consolidated statements of income, comprehensive income, shareholders’

equity, and cash flows for the three-months ended March 31, 2023 and 2022, and the related notes (collectively referred to as the “interim financial statements”).

We have reviewed the accompanying condensed consolidated balance sheet of McGrath RentCorp (a California Corporation) and subsidiaries (the “Company”) as of June 30, 2023, and the related condensed consolidated statements of income, comprehensive income, shareholders’

equity, for the three-month and six-month periods ended June 30, 2023 and 2022, cash flows for the six-month periods ended June 30, 2023 and 2022 and the related notes (collectively referred to as the “interim financial statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

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San Francisco, California

July 27, 2023

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except per share amounts)

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Interest expense

Foreign currency exchange gain

Foreign currency exchange (loss) gain

Income from continuing operations before provision for income taxes

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Other comprehensive (loss) income:

Other comprehensive income:

Foreign currency translation adjustment, net of tax impact

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Common stock, no par value - Authorized 40,000 shares

Issued and outstanding - 24,466 shares as of March 31, 2023 and 24,388 shares as of December 31, 2022

Issued and outstanding - 24,485 shares as of June 30, 2023 and 24,388 shares as of December 31, 2022

Retained earnings

16 unchanged sentences

Balance at March 31, 2023

Share-based compensation

Common stock issued under stock plans, net of shares

withheld for employee taxes

Taxes paid related to net share settlement of stock awards

Dividends accrued of $ 0.465 per share

Other comprehensive income

Balance at June 30, 2023

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

10 unchanged sentences

Balance at March 31, 2022

Share-based compensation

Common stock issued under stock plans, net of shares

withheld for employee taxes

Taxes paid related to net share settlement of stock awards

Dividends accrued of $ 0.455 per share

Other comprehensive income

Balance at June 30, 2022

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

1 unchanged sentence

CONDENSED Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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Gain on sale of used rental equipment

Foreign currency exchange gain

Foreign currency exchange (gain) loss

Amortization of debt issuance costs

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Cash Flows from Financing Activities:

Net borrowings (payments) under bank lines of credit

Net borrowings under bank lines of credit

Taxes paid related to net share settlement of stock awards

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Effect of foreign currency exchange rate changes on cash

Net (decrease) increase in cash

Net increase (decrease) in cash

Cash balance, beginning of period

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2023

June 30, 2023

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The condensed consolidated financial statements for the three months ended March 31, 2023 and 2022 have not been audited, but in the opinion of management, all adjustments (consisting of normal recurring accruals, consolidating and eliminating entries) necessary for the fair presentation of the consolidated financial position, results of operations and cash flows of McGrath RentCorp (the “Company”) have been made.

The condensed consolidated financial statements for the six months ended June 30, 2023 and 2022 have not been audited, but in the opinion of management, all adjustments (consisting of normal recurring accruals, consolidating and eliminating entries) necessary for the fair presentation of the consolidated financial position, results of operations and cash flows of McGrath RentCorp (the “Company”) have been made.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to those rules and regulations.

The consolidated results for the three months ended March 31, 2023 should not be considered as necessarily indicative of the consolidated results for the entire fiscal year.

The consolidated results for the three and six months ended June 30, 2023, should not be considered as necessarily indicative of the consolidated results for the entire fiscal year.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K, filed with the SEC on February 22, 2023 for the year ended December 31, 2022 (the “2022 Annual Report”).

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The ASU is effective for fiscal years beginning after December 15, 2023.

The Company does not expect the adoption of this ASU will have a material impact on the Company's consolidated financial statements.

The Company does not expect the adoption of this ASU to have a material impact on the Company's consolidated financial statements.

IMPLEMENTED ACCOUNTING PRONOUNCEMENTS

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The financial results of Brekke Storage were a part of the Mobile Modular segment since March 1, 2023, including $ 0.2 million of transaction costs.

The following tables summarize the preliminary purchase price allocations reflecting estimated fair values of assets acquired and liabilities assumed in the Vesta Modular and Brekke Storage acquisitions, with excess amounts allocated to goodwill.

On April 1, 2023, the Company completed the purchase of assets of Dixie Temporary Storage, LLC ("Dixie Storage"), for a purchase price of $ 4.9 million.

Dixie Storage is a regional provider of portable storage solutions in the South Carolina market and is highly complementary to the Company's portable storage business segment.

The acquisition expanded the Mobile Modular Portable Storage fleet by approximately 800 units and provided a new regional operation to serve the South Carolina market.

The acquisition was accounted for as a purchase of a “business”

in accordance with criteria in ASC 805, Business Combinations , using the purchase method of accounting.

The financial results of Dixie Storage were a part of the Mobile Modular segment since April 1, 2023, including $ 0.1 million of transaction costs.

The following tables summarize the preliminary purchase price allocations reflecting estimated fair values of assets acquired and liabilities assumed in the Vesta Modular, Brekke Storage and Dixie Storage acquisitions, with excess amounts allocated to goodwill.

The estimated fair values of the assets acquired and liabilities assumed at the acquisition date are determined based on preliminary valuations and analyses.

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Total purchase price

Dixie Storage:

(dollar amounts in thousands)

Rental equipment

Intangible assets:

Customer relationships

Property, plant and equipment

Deferred income

Total purchase price

The value assigned to identifiable intangible assets was determined based on discounted estimated future cash flows associated with such assets to their present value.

The combined acquired goodwill of $ 217.4 million reflects the strategic fit of Vesta Modular and Brekke Storage with the Company’s modular and portable storage business operations.

The Company amortizes the acquired customer relationships over their expected useful lives of 11 years for Vesta Modular and 8 years for Brekke Storage.

The combined acquired goodwill of $ 219.0 million reflects the strategic fit of Vesta Modular, Brekke Storage and Dixie Storage with the Company’s modular and portable storage business operations.

The Company amortizes the acquired customer relationships over their expected useful lives of 11 years for Vesta Modular, 8 years for Brekke Storage and 9 years for Dixie Storage.

The expected useful life for the non-compete agreements is 5 years.

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combined net income.

The pro forma results for the three months ended March 31, 2023 and 2022, have been adjusted to include transaction related costs.

This pro forma

data is presented for informational purposes only and does not purport to be indicative of the results of the future operations or the results that would have occurred had the acquisitions taken place in the periods noted below:

Three months ended March 31,

The pro forma results for the six months ended June 30, 2023 and 2022, have been adjusted to include transaction related costs.

This pro forma data is presented for informational purposes only and does not purport to be indicative of the results of the future operations or the results that would have occurred had the acquisitions taken place in the periods noted below:

Six months ended June 30,

(dollar amounts in thousands, except for per share amounts)

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On February 1, 2023, the Company completed the sale of Adler Tank Rentals, LLC to Ironclad Environmental Solutions, Inc.

("Ironclad"), a portfolio company of Kinderhook Industries, for a sale price of $ 264.5 million.

("Ironclad"), a portfolio company of Kinderhook Industries, for a sale price of $ 268.0 million, which included an additional payment of $ 3.6 million for the final net working capital purchase price adjustment during the quarter ended June 30, 2023.

The total transaction costs incurred from the divestiture was $ 8.9 million, with $ 6.7 million incurred during the six months ended June 2023, and $ 2.2 million incurred during the year ended December 31, 2022.

The divestiture of the Company's Adler Tanks business represents the Company's strategic shift to concentrate its operations on its core modular and storage businesses.

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In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations and ASC 360 , Property, Plant and Equipment, the Company determined that the criteria for the presentation of discontinued operations and held-for-sale, respectively, were met during the first quarter of 2023.

The following table presents the results of Adler Tanks as reported in income from discontinued operations within the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022:

The following table presents the results of Adler Tanks as reported in income from discontinued operations within the condensed consolidated statements of income for the six months ended June 30, 2023 and 2022:

(dollar amounts in thousands)

Three Months Ended

Six Months Ended

Rental related services

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Selling and administrative expenses

Operating income

Income from operations

Interest expense allocation

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Total liabilities of discontinued operations

For the three months ended March 31, 2023 and 2022, significant operating and investing items related to Adler Tanks were as follows:

For the six months ended June 30, 2023 and 2022, significant operating and investing items related to Adler Tanks were as follows:

(in thousands)

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Purchases of property, plant and equipment

The following table presents the reconciliation of income from discontinued operations to Adjusted EBITDA for the three months ended March 31, 2023 and 2022:

The following table presents the reconciliation of income from discontinued operations to Adjusted EBITDA for the six months ended June 30, 2023 and 2022:

(in thousands)

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These contract assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period .

The contract liabilities included in Deferred income on the Company’s consolidated balance sheet totaled $ 46.2 million and $ 27.4 million at March 31, 2023 and December 31, 2022, respectively.

Sales revenues totaling $ 4.4 million were recognized during the three months ended March 31, 2023, which were included in the contract liability balance at December 31, 2022.

The contract liabilities included in Deferred income on the Company’s consolidated balance sheet totaled $ 49.0 million and $ 27.4 million at June 30, 2023 and December 31, 2022.

Sales revenues totaling $ 6.6 million and $ 11.0 million were recognized during the three and six months ended June 30, 2023, respectively, which were included in the contract liability balance at December 31, 2022.

For certain modular building sales, the customer retains a small portion of the contract price until full completion of the contract, or revenue is recognizable prior to customer billing, which results in revenue earned in excess of billings.

These unbilled contract assets are included in Accounts receivable on the Company’s consolidated balance sheet and totaled $ 4.4 million and $ 0.6 million at March 31, 2023 and December 31, 2022, respectively.

These unbilled contract assets are included in Accounts receivable on the Company’s consolidated balance sheet and totaled $ 5.7 million and $ 0.6 million at June 30, 2023 and December 31, 2022, respectively.

The Company generally rents and sells to customers on 30 day payment terms.

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For these leases, sales revenue and the related accounts receivable are recognized upon delivery and installation of the equipment and the unearned interest is recognized over the lease term on a basis which results in a constant rate of return on the unrecovered lease investment.

As of the six months ended June 30, 2023, the Company’s future minimum lease payments to be received under non-cancelable finance leases was $ 4.4 million.

Of the total investment in sales-type leases, non-current future minimum lease payments are expected to be $ 1.1 million in 2024, $ 0.7 million in 2025, and $ 0.2 million in 2026.

The Company’s assessment of current expected losses on these receivables was not material and no credit loss expense was provided as of the six months ended June 30, 2023.

Other revenues include interest income on finance leases and rental income on facility leases.

In the three months ended March 31, 2023, the Company’s lease revenues were $ 136.6 million, consisting of $ 136.0 million of operating lease revenues and $ 0.6 million of finance lease revenues.

In the three and six months ended June 30, 2023, the Company’s lease revenues were $ 140.8 million and $ 277.4 million, respectively, consisting of $ 139.7 million and $ 275.8 million of operating lease revenues, respectively, and $ 1.1 million and $ 1.6 million of finance lease revenues, respectively.

The Company has entered into finance leases to finance certain equipment sales to customers.

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For these leases, sales revenue and the related accounts receivable are recognized upon delivery and installation of the equipment and the unearned interest is recognized over the lease term on a straight-line basis, which results in a constant rate of return on the unrecovered lease investment.

The Company’s finance lease revenues for the three months ended March 31, 2023 include $ 0.5 million of sales revenues and $ 0.1 million of interest income.

The Company’s finance lease revenues for the three and six months ended June 30, 2023 include $ 1.0 million and $ 1.4 million of sales revenues, respectively, and $ 0.1 million and $ 0.2 million of interest income, respectively.

Non-Lease Revenues

Non-lease revenues are recognized in the period when control of the performance obligation is transferred, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.

For liquid and solid containment solutions, portable storage containers and electronic test equipment, rental related services revenues for delivery and return delivery are considered non-lease revenues.

For portable storage containers and electronic test equipment, rental related services revenues for delivery and return delivery are considered non-lease revenues.

Sales revenues are typically recognized at a point in time, which occurs upon the completion of delivery, installation and acceptance of the equipment by the customer.

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Sales taxes charged to customers are reported on a net basis and are excluded from revenues and expenses.

The following table disaggregates the Company’s revenues by lease (within the scope of ASC 842) and non-lease revenues (within the scope of ASC 606) and the underlying service provided for the three months ended March 31, 2023 and 2022:

(in thousands)

Tanks (Discontinued)

Three Months Ended March 31,

Three Months Ended June 30,

Rental related services

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Total revenues

Six Months Ended June 30,

Rental related services

Total non-lease

Total revenues

Rental related services

Total non-lease

Total revenues

Customer returns of rental equipment prior to the end of the rental contract term are typically billed a cancellation fee, which is recorded as rental revenue in the period billed.

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Three Months Ended

Six Months Ended

(in thousands)

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calculating diluted earnings per share

There were 96,241 anti-dilutive securities excluded from the computation of diluted earnings per share for the three months ended March 31, 2023 and no anti-dilutive securities excluded from the computation of diluted earnings per share for the same period in 2022.

There were 697 anti-dilutive securities excluded from the computation of diluted earnings per share for the six months ended June 30, 2023, and 7,315 anti-dilutive securities excluded from the computation of diluted earnings per share for the same period in 2022.

The Company has in the past made purchases of shares of its common stock from time to time in over-the-counter market (NASDAQ) transactions, through privately negotiated, large block transactions and through a share repurchase plan, in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.

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There can be no assurance that any authorized shares will be repurchased, and the Repurchase Plan may be modified, extended or terminated by the Company’s Board of Directors at any time.

There were no shares repurchased during the three months ended March 31, 2023 and 2022.

As of March 31, 2023, 1,309,805 shares remained authorized for repurchase under the Repurchase Plan.

There were no shares repurchased during the three and six months ended June 30, 2023 and 2022.

As of June 30, 2023, 1,309,805 shares remained authorized for repurchase under the Repurchase Plan.

GOODWILL AND INTANGIBLE ASSETS

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Derecognition of goodwill divested

Balance at March 31, 2023

Balance at June 30, 2023

Intangible assets consist of the following:

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Net book value

March 31, 2023

June 30, 2023

Customer relationships

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The Company last conducted a qualitative analysis of its goodwill and intangible assets in the fourth quarter 2022, with no indicators of impairment.

In addition, no impairment triggering events occurred during the three months ended March 31, 2023.

In addition, no impairment triggering events occurred during the six months ended June 30, 2023.

Determining fair value of a reporting unit is judgmental and involves the use of significant estimates and assumptions.

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Intangible assets with finite useful lives are amortized over their respective useful lives.

Amortization expense in the three months ended March 31, 2023 and 2022, was $ 2.3 million and $ 1.5 million, respectively.

Based on the carrying values at March 31, 2023 and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be $ 8.0 million for the remainder of fiscal year 2023, $ 9.8 million in 2024, $ 9.7 million in 2025, $ 9.3 million in 2026, $ 9.1 million in 2027 and $ 7.8 million in 2028.

Amortization expense in the six months ended June 30, 2023 and 2022, was $ 5.0 million and $ 3.0 million, respectively.

Based on the carrying values at June 30, 2023 and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be $ 5.3 million for the remainder of fiscal year 2023, $ 9.8 million in 2024 and 2025, $ 9.3 million in 2026, $ 9.1 million in 2027 and $ 7.8 million in 2028.

SEGMENT REPORTING

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The Company does not report total assets by business segment.

Summarized financial information for the three months ended March 31, 2023 and 2022 for the Company’s reportable segments and discontinued operations are shown in the following table:

Summarized financial information for the six months ended June 30, 2023 and 2022 for the Company’s reportable segments and discontinued operations are shown in the following table:

(dollar amounts in thousands)

Tanks (Discontinued) 3

Three Months Ended March 31,

Six Months Ended June 30,

Rental revenues

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Average utilization 2

Gross Enviroplex sales revenues were $ 941 and $ 917 for the three months ended March 31, 2023 and 2022, respectively.

There were no inter-segment sales to Mobile Modular in the three months ended March 31, 2023 and 2022, which required elimination in consolidation.

Gross Enviroplex sales revenues were $ 1,871 and $ 6,423 for the six months ended June 30, 2023 and 2022, respectively.

There were $ 7 inter-segment sales to Mobile Modular in the six months ended June 30, 2023 and $ 856 inter-segment sales during the same period in 2022, which required elimination in consolidation.

Utilization is calculated each month by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding accessory equipment, and new equipment inventory.

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The financial results of Adler Tanks included in this table are through the date of the business divestiture, which occurred on February 1, 2023.

No single customer accounted for more than 10% of total revenues for the three months ended March 31, 2023 and 2022.

No single customer accounted for more than 10% of total revenues for the six months ended June 30, 2023 and 2022.

Revenues from foreign country customers accounted for 3 % and 4 % of the Company’s total revenues for the same periods, respectively.

SUBSEQUENT EVENT

On April 1, 2023, the Company completed the purchase of assets of Dixie Temporary Storage, LLC ("Dixie Storage"), for a purchase price of $ 4.9 million.

Dixie Storage is a regional provider of portable storage solutions in the South Carolina market and is highly complementary to the Company's portable storage business segment.

The acquisition grew the Mobile Modular Portable Storage fleet by approximately 800 units and provided a new regional operation to serve the South Carolina market.

The acquisition will be accounted for as a purchase of a “business”

in accordance with criteria in ASC 805, Business Combinations , using the purchase method of accounting.

On July 1, 2023, the Company completed the purchase of assets of Inland Leasing and Storage ("Inland Leasing"), for a purchase price of $ 3.8 million.

Inland Leasing is a regional provider of portable storage solutions in the Colorado market and is highly complementary to the Company's portable storage business segment.

The acquisition grew the Mobile Modular Portable Storage fleet by approximately 600 units, which will further support the new regional operation acquired from the Brekke Storage acquisition.

The acquisition will be accounted for as a purchase of "assets" in accordance with criteria in ASC 805, Business Combinations.

Incremental transaction costs associated with the asset purchase were not significant.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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and (3) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”).

The Mobile Modular business segment includes the results of operations of the Mobile Modular Portable Storage division, which represented approximately 14% of the Company’s total revenues from continuing operations in the three months ended March 31, 2023.

The Mobile Modular business segment includes the results of operations of the Mobile Modular Portable Storage division, which represented approximately 13% of the Company’s total revenues from continuing operations in the six months ended June 30, 2023.

Mobile Modular Portable Storage offers portable storage units and high security portable office units for rent, lease and purchase.

1 unchanged sentence

Brekke Storage was acquired on March 1, 2023, with its results included in the Mobile Modular segment since that date.

See Note 4 to the consolidated financial statements for the three months ended March 31, 2023, for more details about the acquisitions.

In the three months ended March 31, 2023, Mobile Modular, TRS-RenTelco and Enviroplex contributed 70%, 37% and -7% of the Company’s income from continuing operations before provision for taxes (the equivalent of “pretax income”), respectively, compared to 72%, 33% and -5% for the same period in 2022.

Dixie Storage was acquired on April 1, 2023, with its results included in the Mobile Modular segment since that date.

See Note 4 to the consolidated financial statements for the six months ended June 30, 2023, for more details about the acquisitions.

In the six months ended June 30, 2023, Mobile Modular, TRS-RenTelco and Enviroplex contributed 81%, 23% and negative 4% of the Company’s income from continuing operations before provision for taxes (the equivalent of “pretax income”), respectively, compared to 72%, 30% and negative 2% for the same period in 2022.

The Company generates its revenues primarily from the rental of its equipment on operating leases and from sales of equipment occurring in the normal course of business.

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Electronic test equipment revenues are primarily affected by the business activity within these industries related to research and development, manufacturing, and communication infrastructure installation and maintenance.

The Company’s rental operations include rental and rental related service revenues which comprised approximately 84% and 87% of consolidated revenues from continuing operations in the three months ended March 31, 2023 and 2022, respectively.

Of the total continuing rental operations revenues for the three months ended March 31, 2023, Mobile Modular and TRS-RenTelco comprised 78% and 22%, respectively, compared to 73% and 27%, respectively, in the same period of 2022.

The Company’s rental operations include rental and rental related service revenues which comprised approximately 79% and 81% of consolidated revenues from continuing operations in the six months ended June 30, 2023 and 2022, respectively.

Of the total continuing rental operations revenues for the six months ended June 30, 2023, Mobile Modular and TRS-RenTelco comprised 80% and 20%, respectively, compared to 74% and 26%, respectively, in the same period of 2022.

The Company’s direct costs of rental operations include depreciation of rental equipment, rental related service costs, impairment of rental equipment (if applicable), and other direct costs of rental operations (which include direct labor, supplies, repairs, insurance, property taxes, license fees, cost of sub-rentals and amortization of certain lease costs).

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In addition, Enviroplex sells new modular buildings used primarily as classrooms in California.

For the three months ended March 31, 2023 and 2022, sales and other revenues of modular and electronic test equipment comprised approximately 16% and 13% of the Company’s consolidated revenues from continuing operations, respectively.

Of the total sales and other revenues from continuing operations for the three months ended March 31, 2023 and 2022, Mobile Modular and Enviroplex together comprised 77% and 73%, respectively, and TRS-RenTelco comprised 23% and 27%, respectively.

For the six months ended June 30, 2023 and 2022, sales and other revenues of modular and electronic test equipment comprised approximately 21% and 19% of the Company’s consolidated revenues from continuing operations, respectively.

Of the total sales and other revenues from continuing operations for the six months ended June 30, 2023 and 2022, Mobile Modular and Enviroplex together comprised 81% and 79%, respectively, and TRS-RenTelco comprised 19% and 21%, 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.

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Recent Developments

Dixie Storage Acquisition

On April 1, 2023, the Company completed the purchase of assets of Dixie Temporary Storage, LLC ("Dixie Storage"), for a purchase price of $4.9 million.

Dixie Storage is a regional provider of portable storage solutions in the South Carolina market and is highly complementary to the Company's portable storage business segment.

The acquisition expanded the Mobile Modular Portable Storage fleet by approximately 800 units and provided a new regional operation to serve the South Carolina market.

The acquisition will be accounted for as a purchase of a “business”

in accordance with criteria in ASC 805, Business Combinations , using the purchase method of accounting.

On February 22, 2023, the Company announced that the Board of Directors declared a quarterly cash dividend of $0.465 per common share for the quarter ended March 31, 2023, an increase of 2% over the prior year’s comparable quarter.

Inland Leasing Acquisition

On July 1, 2023, the Company completed the purchase of assets of Inland Leasing and Storage ("Inland Leasing"), for a purchase price of $3.8 million.

Inland Leasing is a regional provider of portable storage solutions in the Colorado market and is highly complementary to the Company's portable storage business segment.

The acquisition grew the Mobile Modular Portable Storage fleet by approximately 600 units, which will further support the new regional operation acquired from the Brekke Storage acquisition.

On June 7, 2023, the Company announced that the Board of Directors declared a quarterly cash dividend of $0.465 per common share for the quarter ended June 30, 2023, an increase of 2% over the prior year’s comparable quarter.

Results of Operations

Three Months Ended March 31, 2023 Compared to

Three Months Ended March 31, 2022

Consolidated revenues for the three months ended March 31, 2023, increased 19% to $173.2 million, from $145.4 million in the same period in 2022.

Consolidated net income for the three months ended March 31, 2023, excluding the gain on sale of discontinued operations from the divestiture of Adler Tanks, decreased 32% to $12.8 million, from $18.8 million for the same period in 2022.

The decrease in consolidated net income during the current period was primarily attributed to acquisition and divestiture related transaction costs of $14.2 million incurred during 2023.

Earnings per diluted share for the three months ended March 31, 2023, increased by $2.15 to $2.92, which was primarily the result of the $58.9 million gain on sale of discontinued operations, compared to $0.77 for the same period in 2022.

Revenues from discontinued operations for the three months ended March 31, 2023, was $9.4 million, compared to $20.3 million for the same period in 2022.

Income from discontinued operations for the three months ended March 31, 2023, was $60.1 million, which included the gain on sale of discontinued operations of $58.9 million, compared to $1.1 million for the same period in 2022.

Earnings per diluted share from discontinued operations for the three months ended March 31, 2023 was $2.45, compared to $0.05 for the same period in 2022.

Three Months Ended June 30, 2023 Compared to

Three Months Ended June 30, 2022

Consolidated revenues for the three months ended June 30, 2023, increased 15% to $203.1 million, from $177.0 million in the same period in 2022.

Consolidated net income for the three months ended June 30, 2023, excluding the gain on sale of discontinued operations from the divestiture of Adler Tanks, increased 7% to $28.0 million, from $26.1 million for the same period in 2022.

The increase in consolidated net income during the current period was primarily attributed to higher gross profit from Mobile Modular, partly offset by higher selling, general and administrative expenses.

Earnings per diluted share for the three months ended June 30, 2023, increased by $0.18 to $1.25, compared to $1.07 for the same period in 2022.

There were no revenues from discontinued operations for the three months ended June 30, 2023, compared to $23.7 million for the same period in 2022.

Income from discontinued operations for the three months ended June 30, 2023, was $2.6 million, primarily attributed to final working capital adjustments from the divestiture of Adler Tanks.

Income from discontinued operations for the same period in 2022 was $2.6 million.

Earnings per diluted share from discontinued operations for the three months ended June 30, 2023 was $0.11, unchanged from the same period in 2022.

For additional information on discontinued operations and the divestiture of Adler Tanks, refer to Note 5 of the consolidated financial statements.

For the three months ended March 31, 2023, on a consolidated basis from continuing operations:

For the three months ended June 30, 2023, on a consolidated basis from continuing operations:

Gross profit increased $27.7 million, or 41%, to $94.6 million in 2023.

Mobile Modular’s gross profit increased $28.9 million, or 58%, largely due to the Vesta Modular acquisition, which contributed to the higher gross profit on rental, sales, and rental related services revenues.

TRS-RenTelco’s gross profit increased $0.9 million, or 6%, primarily due to higher gross profit on other and sales revenues.

Enviroplex’s gross profit decreased $0.1 million, or 39%, primarily due to $0.1 million higher cost of sales in 2023.

Selling and administrative expenses increased $24.9 million to $57.5 million, primarily due to $16.5 million higher marketing and administrative costs, which included $14.2 million in acquisition and divestiture related transaction costs, and an increase in employees’

salaries and benefit costs of $5.8 million, partly attributable to the increased employee headcount from the Vesta Modular acquisition.

TRS-RenTelco’s gross profit decreased $0.3 million, or 2%, primarily due to lower gross profit on rental and rental related services revenues.

Enviroplex’s gross profit decreased $1.0 million, primarily due to lower sales revenue in 2023.

Selling and administrative expenses increased $13.2 million to $47.0 million, primarily due to an increase in employees' salaries and benefit costs of $6.5 million, due in part to the increased employee headcount from the Vesta Modular acquisition and higher marketing and administrative costs of $3.0 million.

Interest expense increased $7.5 million to $9.9 million, which was primarily attributed to $239.3 million higher average debt levels of the Company and a higher effective interest rate in 2023 of 5.94%, compared to 2.79% for the same period in 2022.

The $142.1 million increase in average debt during the three-month period was primarily the result of the funding of the Vesta Modular and Brekke Storage acquisitions.

The increase in average debt during the three-month period was primarily the result of the funding of the Vesta Modular, Brekke Storage and Dixie Storage acquisitions.

Pre-tax income contribution by Mobile Modular and TRS-RenTelco was 85% and 17%, respectively, compared to 72% and 29%, respectively, for the comparable 2022 period.

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Enviroplex pre-tax income contribution was negative 2% and negative 1% in 2023 and 2022, respectively.

The provision for income taxes resulted in an effective tax rate of 23.8% and 23.5%, for the quarters ended March 31, 2023 and 2022, respectively.

The provision for income taxes resulted in an effective tax rate of 25.7% and 22.9%, for the quarters ended June 30, 2023 and 2022, respectively.

Adjusted EBITDA increased $19.3 million, or 33%, to $77.0 million in 2023.

Mobile Modular

For the three months ended March 31, 2023, Mobile Modular’s total revenues increased $36.0 million, or 40%, to $126.7 million compared to the same period in 2022, largely due to contributions from the Vesta Modular acquisition, which contributed to the higher rental, rental related services, and sales revenues.

The revenue increase, together with higher gross profit on rental, sales and rental related services revenues, offset by higher selling and administrative expenses, resulted in a $7.8 million decrease in pre-tax income to $8.7 million for the three months ended March 31, 2023, from $16.6 million for the same period in 2022.

For the three months ended June 30, 2023, Mobile Modular’s total revenues increased $52.9 million, or 47%, to $164.3 million compared to the same period in 2022, largely due to contributions from the Vesta Modular acquisition, which contributed to the higher rental, rental related services, and sales revenues.

The revenue increase, together with higher gross profit on rental, rental related services and sales revenues, offset by higher selling and administrative expenses, resulted in a $9.9 million increase in pre-tax income to $31.9 million for the three months ended June 30, 2023, from $21.9 million for the same period in 2022.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

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Mobile Modular’s gross profit for the three months ended March 31, 2023 increased $18.5 million, or 43%, to $61.6 million.

For the three months ended March 31, 2023 compared to the same period in 2022:

Mobile Modular’s gross profit for the three months ended June 30, 2023 increased $28.9 million, or 58%, to $78.6 million.

For the three months ended June 30, 2023 compared to the same period in 2022:

Gross Profit on Rental Revenues –

Rental revenues increased $24.3 million, or 37%, due to 31% higher average rental equipment on rent and 4% higher average monthly rental rates in 2023.

As a percentage of rental revenues, depreciation was 12% in 2023 and 13% in 2022, and other direct costs were 32% in 2023 and 33% in 2022, which resulted in gross margin percentages of 56% in 2023, compared to 55% in 2022.

As a percentage of rental revenues, depreciation was 12% in both 2023 and 2022, and other direct costs were 28% in 2023 and 37% in 2022, which resulted in gross margin percentages of 60% in 2023, compared to 51% in 2022.

The higher rental revenues and higher rental margins, resulted in gross profit on rental revenues increasing $20.8 million, or 63%, to $53.9 million in 2023.

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Gross Profit on Sales –

Sales revenues increased $7.2 million, or 70%, compared to 2022, due to higher new and used equipment sales.

Sales revenues increased $14.5 million, or 59%, compared to 2022, due to higher new equipment sales.

The lower gross margin percentage of 31% in 2023 compared to 41% in 2022, and higher sales revenue resulted in gross profit on sales increasing $2.1 million, or 21%, to $12.2 million.

The higher gross margin on sales in 2023 was primarily due to increased margins on new sales.

The lower gross margin on sales in 2023 was primarily due to a higher mix of new versus used sales.

Vesta Modular contributed $2.8 million in gross profit on sales in 2023.

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however, these sales and related gross margins can fluctuate from quarter to quarter and year to year depending on customer requirements, equipment availability and funding.

For the three months ended March 31, 2023, selling and administrative expenses increased $21.8 million, or 88%, to $46.5 million, primarily due to $8.4 million higher marketing and administrative costs, which includes $7.5 million in acquisition related transaction costs, $7.8 million higher allocated corporate expenses, which includes $5.4 million in allocated divestiture transaction costs, and a $4.6 million increase in employee salaries and benefit costs, largely due to the addition of Vesta Modular employees.

For the three months ended March 31, 2023, TRS-RenTelco’s total revenues increased $2.6 million to $36.1 million compared to the same period in 2022, primarily due to higher sales and rental revenues.

Gross profit increase of $0.9 million, which was offset by higher selling and administrative expenses, resulted in a 38% decrease in pre-tax income to $4.7 million for the three months ended March 31, 2023, from $7.5 million for the same period in 2022.

For the three months ended June 30, 2023, selling and administrative expenses increased $12.5 million, or 49%, to $38.3 million, primarily due to $6.2 million higher employee salaries and benefit costs, largely due to the addition of Vesta Modular employees, $2.8 million higher allocated corporate expenses, and $1.9 million increased marketing and administrative expenses.

For the three months ended June 30, 2023, TRS-RenTelco’s total revenues increased $0.5 million to $37.8 million compared to the same period in 2022, primarily due to higher sales and other revenues.

Decreased gross profit and higher selling and administrative expenses, resulted in a 23% decrease in pre-tax income to $6.7 million for the three months ended June 30, 2023, from $8.7 million for the same period in 2022.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

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TRS-RenTelco’s gross profit for the three months ended March 31, 2023 increased $0.9 million, or 6%, to $15.6 million.

For the three months ended March 31, 2023 compared to the same period in 2022:

TRS-RenTelco’s gross profit for the three months ended June 30, 2023 decreased $0.3 million, or 2%, to $15.9 million.

For the three months ended June 30, 2023 compared to the same period in 2022:

Gross Profit on Rental Revenues –

Rental revenues increased $0.6 million, or 2%, depreciation expense increased $0.4 million, or 3%, and other direct costs increased $0.5 million or 11%, resulting in a 2% decrease in gross profit on rental revenues to $11.5 million.

Rental revenues decreased $1.1 million, or 4%, with depreciation expense and other direct costs comparable to the previous period, resulting in a 10% decrease in gross profit on rental revenues to $10.8 million.

As a percentage of rental revenues, depreciation was 43% and 42% in 2023 and 2022, respectively, and other direct costs were 19% and 18%, in 2023 and 2022, respectively, which resulted in a gross margin percentage of 38% and 40% in 2023 and 2022, respectively.

The rental revenues increase was primarily due to 3% higher average monthly rental rates, partly offset by 1% lower average rental equipment on rent in 2023, as compared to 2022.

The decrease in rental revenues was primarily due to a 7% reduction in average rental equipment on rent, partly offset by 3% higher average monthly rental rates in 2023, as compared to 2022.

Gross Profit on Sales –

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however, these sales and related gross margins can fluctuate from quarter to quarter depending on customer requirements and related mix of equipment sold, equipment availability and funding.

For the three months ended March 31, 2023, selling and administrative expenses increased $2.9 million, or 43%, to $9.5 million, primarily due to $2.3 million in higher allocated corporate expenses and $0.3 million in higher employee salaries and benefit costs.

For the three months ended June 30, 2023, selling and administrative expenses increased $0.5 million, or 8%, to $7.1 million.

Six Months Ended June 30, 2023 Compared to

Six Months Ended June 30, 2022

Consolidated revenues for the six months ended June 30, 2023, increased 17% to $376.2 million, from $322.4 million in the same period in 2022.

Consolidated net income for the six months ended June 30, 2023, excluding the gain on sale of discontinued operations from the divestiture of Adler Tanks, decreased 9% to $40.7 million, from $44.9 million for the same period in 2022.

The decrease in consolidated net income during the current period was primarily attributed to acquisition and divestiture related transaction costs of $14.3 million incurred during 2023.

Earnings per diluted share for the six months ended June 30, 2023, increased by $2.34 to $4.17, which was primarily the result of the $61.5 million gain on sale of discontinued operations, compared to $1.83 for the same period in 2022.

Revenues from discontinued operations for the six months ended June 30, 2023, was $9.4 million, compared to $44.0 million for the same period in 2022.

Income from discontinued operations for the six months ended June 30, 2023, was $62.8 million, which included the net gain on sale of discontinued operations of $61.5 million, compared to $3.7 million for the same period in 2022.

Earnings per diluted share from discontinued operations for the six months ended June 30, 2023 was $2.56, compared to $0.15 for the same period in 2022.

For additional information on discontinued operations and the divestiture of Adler Tanks, refer to Note 5 of the consolidated financial statements.

For the six months ended June 30, 2023, on a consolidated basis from continuing operations:

Gross profit increased $47.0 million, or 38%, to $172.0 million in 2023.

Mobile Modular’s gross profit increased $47.4 million, or 51%, largely due to the Vesta Modular acquisition, which contributed to the higher gross profit on rental, sales, and rental related services revenues.

TRS-RenTelco’s gross profit increased $0.7 million, or 2%, primarily due to higher gross profit on sales and other revenues.

Enviroplex’s gross profit decreased $1.1 million, or 82%, primarily due to $3.7 million lower sales in 2023.

Selling and administrative expenses increased $38.1 million to $104.5 million, primarily due to $19.5 million higher marketing and administrative costs, which included $14.3 million in acquisition and divestiture related transaction costs, and an increase in employees’

salaries and benefit costs of $12.3 million, partly attributable to the increased employee headcount from the Vesta Modular acquisition.

Interest expense increased $12.7 million to $17.4 million, which was primarily attributed to $190.7 million higher average debt levels of the Company and a higher effective interest rate in 2023 of 5.77%, compared to 2.74% for the same period in 2022.

The $190.7 million increase in average debt during the six-month period was primarily the result of the funding of the Vesta Modular, Brekke Storage and Dixie Storage acquisitions.

Pre-tax income contribution by Mobile Modular and TRS-RenTelco was 81% and 23%, respectively, compared to 72% and 30%, respectively, for the comparable 2022 period.

These results are discussed on a segment basis below.

Enviroplex pre-tax income contribution was negative 4% and negative 2% in 2023 and 2022, respectively.

The provision for income taxes resulted in an effective tax rate of 21.5% and 23.3%, for the periods ended June 30, 2023 and 2022, respectively.

Adjusted EBITDA increased $30.9 million, or 29%, to $138.7 million in 2023, compared to $107.8 in 2022.

Mobile Modular

For the six months ended June 30, 2023, Mobile Modular’s total revenues increased $88.9 million, or 44%, to $290.9 million compared to the same period in 2022, primarily due to higher rental, sales, and rental related services revenues.

The revenue increase, together with higher gross profit on rental, rental related services and sales revenues, partly offset by higher selling and administrative expenses resulted in a 6% increase in pre-tax income to $40.7 million for the six months ended June 30, 2023, from $38.6 million for the same period in 2022.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

Mobile Modular –

Six Months Ended 6/30/23 compared to Six Months Ended 6/30/22 (Unaudited)

(dollar amounts in thousands)

Six Months Ended

Increase (Decrease)

Rental related services

Rental operations

Total revenues

Costs and Expenses

Direct costs of rental operations:

Depreciation of rental equipment

Rental related services

Total direct costs of rental operations

Costs of sales

Total costs of revenues

Rental related services

Rental operations

Total gross profit

Selling and administrative expenses

Income from operations

Interest expense allocation

Pre-tax income

Other Selected Information

Adjusted EBITDA 5

Average rental equipment 1

Average rental equipment on rent

Average monthly total yield 2

Average utilization 3

Average monthly rental rate 4

Period end rental equipment 1

Period end utilization 3

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

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 rental equipment.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

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Mobile Modular’s gross profit for the six months ended June 30, 2023 increased $47.4 million, or 51%, to $140.2 million.

For the six months ended June 30, 2023 compared to the same period in 2022:

Gross Profit on Rental Revenues –

Rental revenues increased $43.9 million, or 35%, primarily due to 25% higher average rental equipment on rent and 7% higher average rental rates in 2023.

The increase in rental revenue and average equipment on rent was due in part to the Vesta Modular acquisition.

As a percentage of rental revenues, depreciation was 12% in both 2023 and 2022, and other direct costs were 30% in 2023 and 35% in 2022, which resulted in gross margin percentages of 59% in 2023 and 53% in 2022.

The higher rental revenues and rental margins resulted in gross profit on rental revenues increasing $33.0 million, or 49%, to $99.6 million in 2023.

Vesta Modular contributed $14.4 million gross profit on rental revenues in 2023.

Gross Profit on Rental Related Services –

Rental related services revenues increased $19.8 million, or 50%, compared to 2022.

The increase in rental related services revenues was primarily attributable to higher amortization of modular building delivery and return delivery and dismantle revenues, higher site related revenues and revenues derived from other services performed during the lease and increased return delivery revenues at Portable Storage.

The higher revenues and higher gross margin percentage of 30% in 2023, compared to 29% in 2022, resulted in rental related services gross profit increasing $6.5 million, or 57%, to $17.8 million in 2023.

Vesta Modular contributed $2.6 million gross profit on rental related services revenues in 2023.

Gross Profit on Sales –

Sales revenues increased $21.8 million, or 62%, compared to 2022, due to higher new equipment sales.

The lower gross margin percentage of 33% in 2023 compared to 40% in 2022, primarily due to lower margins on new equipment sales revenues and lower used equipment sales, resulted in gross profit on sales increasing $4.6 million, or 32%, to $18.7 million.

Sales occur routinely as a normal part of Mobile Modular’s rental business;

however, these sales and related gross margins can fluctuate from quarter to quarter and year to year depending on customer requirements, equipment availability and funding.

Vesta Modular contributed $4.6 million gross profit on sales revenues in 2023.

For the six months ended June 30, 2023, selling and administrative expenses increased $34.4 million, or 68%, to $84.8 million, primarily due to increased employee salaries and benefit costs of $10.8 million, due in part to the addition of Vesta Modular employees, $10.5 million higher allocated corporate expenses, which includes $5.4 million in allocated divestiture transaction costs, and a $10.3 million increase in marketing and administrative expenses, which includes $7.6 million in acquisition related transaction costs.

For the six months ended June 30, 2023, TRS-RenTelco’s total revenues increased $3.1 million, to $74.0 million compared to the same period in 2022, primarily due to higher sales and other revenues.

Pre-tax income decreased $4.9 million, or 30%, to $11.3 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to lower gross profit on rental revenues and $3.4 million higher selling and administrative expenses, partly offset by higher other and sales revenues.

The following table summarizes results for each revenue and gross profit category, income from operations, pre-tax income and other selected information.

TRS-RenTelco –

Six Months Ended 6/30/23 compared to Six Months Ended 6/30/22 (Unaudited)

(dollar amounts in thousands)

Six Months Ended

Increase (Decrease)

Rental related services

Rental operations

Total revenues

Costs and Expenses

Direct costs of rental operations:

Depreciation of rental equipment

Rental related services

Total direct costs of rental operations

Costs of sales

Total costs of revenues

Rental related services

Rental operations

Total gross profit

Selling and administrative expenses

Income from operations

Interest expense allocation

Foreign currency exchange loss

Pre-tax income

Other Selected Information

Adjusted EBITDA 5

Average rental equipment 1

Average rental equipment on rent

Average monthly total yield 2

Average utilization 3

Average monthly rental rate 4

Period end rental equipment 1

Period end utilization 3

Average and Period end rental equipment represents the cost of rental equipment, excluding new equipment inventory and accessory equipment.

Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.

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 rental equipment.

Average monthly rental rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

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TRS-RenTelco’s gross profit for the six months ended June 30, 2023 increased $0.7 million, or 2%, to $31.5 million.

For the six months ended June 30, 2023 compared to the same period in 2022:

Gross Profit on Rental Revenues –

Rental revenues decreased $0.5 million, or 1%, and depreciation expense increased $0.3 million, or 1%, resulting in a 6% decrease in gross profit on rental revenues to $22.3 million.

As a percentage of rental revenues, depreciation was 43% and 42% in 2023 and 2022, respectively, and other direct costs were 19% and 17% in 2023 and 2022, respectively, which resulted in a gross margin percentage of 39% and 41% in 2023 and 2022, respectively.

The rental revenues decrease was due to 4% lower average rental equipment on rent, partly offset by 3% higher average monthly rental rates in 2023 as compared to 2022.

The higher rental rates were reflective of higher rates for both general purpose and telecommunication equipment on rent compared to the prior year.

Gross Profit on Sales –

Sales revenues increased $2.3 million, or 22%, to $12.6 million in 2023.

Gross profit on sales increased $0.9 million, or 15%, to $7.0 million with a gross margin percentage of 55% in 2023, compared to 59% in 2022.

Sales occur as a normal part of TRS-RenTelco’s rental business;

however, these sales and related gross margins can fluctuate from quarter to quarter depending on customer requirements and related mix of equipment sold, equipment availability and funding.

For the six months ended June 30, 2023, selling and administrative expenses increased $3.4 million, or 26%, to $16.6 million, primarily due to higher allocated corporate expenses.

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, share-based compensation and transaction costs.

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Three Months Ended

Six Months Ended

Twelve Months Ended

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Transaction costs include acquisition and divestiture related legal and professional fees and other costs specific to these transactions.

As of March 31, 2023, total Adjusted EBITDA from both continuing and discontinued operations was $65.4 million, compared to $56.7 million for the same period in 2022, excluding the gain on divestiture of Adler Tanks.

For the three months ended March 31, 2023 and 2022, the total Adjusted EBITDA from continuing operations was $61.7 million and $50.1 million, respectively, and the total Adjusted EBITDA from discontinued operations was $3.7 million and $6.6 million, respectively.

For the six months ended June 30, 2023, total Adjusted EBITDA from both continuing and discontinued operations was $142.4 million, compared to $123.0 million for the same period in 2022, excluding the gain on divestiture of Adler Tanks.

For the six months ended June 30, 2023 and 2022, the total Adjusted EBITDA from continuing operations was $138.7 million and $107.8 million, respectively, and the total Adjusted EBITDA from discontinued operations was $3.7 million and $15.2 million, respectively.

The reconciliation of income from discontinued operations to Adjusted EBITDA can be found in Note 5 of the consolidated financial statements.

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Three Months Ended

Six Months Ended

Twelve Months Ended

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Permit the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility and the Note Purchase Agreement (as defined and more fully described under the heading “Liquidity and Capital Resources”

in this MD&A)) of Adjusted EBITDA (as defined in the Credit Facility and the Note Purchase Agreement) to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1.

At March 31, 2023, the actual ratio was 4.12 to 1.

in this MD&A)) of Adjusted

EBITDA (as defined in the Credit Facility and the Note Purchase Agreement) to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1.

At June 30, 2023, the actual ratio was 3.82 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 March 31, 2023, the actual ratio was 2.21 to 1.

At March 31, 2023, the Company was in compliance with each of the aforementioned covenants.

At June 30, 2023, the actual ratio was 2.18 to 1.

At June 30, 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.

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The Company’s rental businesses are capital intensive and generate significant cash flows.

Cash flows for the Company for the three months ended March 31, 2023 compared to the same period in 2022 are summarized as follows:

Cash flows for the Company for the six months ended June 30, 2023 compared to the same period in 2022 are summarized as follows:

Cash Flows from Operating Activities:

The Company’s operations provided net cash of $71.5 million in 2023, compared to net cash provided of $82.0 million in 2022.

The $16.0 million decrease in net cash provided by operating activities was primarily attributable to $41.8 million lower deferred income taxes and $11.6 million higher prepaid expenses and other assets, partially offset by a $34.6 million increase in accounts payable and accrued liabilities, primarily due to higher income taxes payable.

The $10.6 million decrease in net cash provided by operating activities was primarily attributable to $33.7 million lower deferred income taxes, partially offset by a $25.3 million increase in accounts payable and accrued liabilities, primarily due to higher income taxes payable.

Cash Flows from Investing Activities:

Net cash used in investing activities was $300.2 million in 2023, compared to $69.6 million in 2022.

The $229.0 million increase in cash used was primarily due to the $453.6 million acquisition of Vesta Modular and Brekke Storage in 2023, partly offset by $262.4 million in proceeds from the sale of discontinued operations from the divestiture of Adler Tanks.

The $230.6 million increase in cash used was primarily due to the $456.3 million paid for the acquisitions of Vesta Modular, Brekke Storage and Dixie Storage in 2023, partly offset by $268.0 million in proceeds from the sale of discontinued operations from the divestiture of Adler Tanks.

Cash Flows from Financing Activities:

Net cash provided by financing activities was $230.0 million in 2023, compared to net cash used of $13.2 million in 2022.

The $244.6 million change in net cash during 2023 was primarily attributable to increased borrowings under bank lines of credit and note purchase agreements, as the borrowings were primarily attributed to the funding of the Vesta Modular and Brekke Storage acquisitions.

The $243.2 million change in net cash during 2023 was primarily attributable to increased borrowings under bank lines of credit and note purchase agreements, as the borrowings were primarily attributed to the funding of the Vesta Modular, Brekke Storage and Dixie Storage acquisitions.

Significant capital expenditures are required to maintain and grow the Company’s rental assets.

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Sales occur routinely as a normal part of the Company’s rental business.

However, these

sales can fluctuate from period to period depending on customer requirements and funding.

However, these sales can fluctuate from period to period depending on customer requirements and funding.

Although the net proceeds received from sales may fluctuate from period to period, the Company believes its liquidity will not be adversely impacted from lower sales in any given year because it believes it has the ability to increase its bank borrowings and conserve its cash in the future by reducing the amount of cash it uses to purchase rental equipment, pay dividends, or repurchase the Company’s common stock.

Unsecured Revolving Lines of Credit

On July 15 th , 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”).

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”).

The Credit Facility provides for a $650.0 million unsecured revolving credit facility (which may be further increased to $950.0 million by adding one or more tranches of term loans and/or increasing the aggregate revolving commitments), which includes a $40.0 million sublimit for the issuance of standby letters of credit and a $20.0 million sublimit for swingline loans.

The proceeds of the Credit Facility are available to be used for general corporate purposes, including permitted acquisitions.

The Credit Facility permits the Company’s existing indebtedness to remain, which includes the Company’s $12.0 million Treasury Sweep Note due March 31, 2025, the Company’s existing senior notes issued pursuant to the Note Purchase and Private Shelf Agreement with Prudential Investment Management, Inc., dated as of April 21, 2011 (as amended):

The Credit Facility permits the Company’s existing indebtedness to remain, which includes the Company’s $20.0 million Treasury Sweep Note due July 15, 2027, the Company’s existing senior notes issued pursuant to the Note Purchase and Private Shelf Agreement with Prudential Investment Management, Inc., dated as of April 21, 2011 (as amended):

(i) the $60.0 million aggregate outstanding principal of notes issued November 5, 2015 and due November 5, 2022, (ii) the $40.0 million aggregate outstanding principal of notes issued March 17, 2021 and due March 17, 2028, and (iii) the $60.0 million aggregate outstanding principal of notes issued June 16, 2021 and due June 16, 2026.

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All obligations outstanding under the prior credit facility as of the date of the Credit Facility were refinanced by the Credit Facility on July 15, 2022.

On August 19, 2022, the Company entered into an amended and restated Credit Facility Letter Agreement and a Credit Line Note in favor of MUFG Union Bank, N.A., which provides for a $20.0 million line of credit facility related to its cash management services (“Sweep Service Facility”).

(“Sweep Service Facility”).

The Sweep Service Facility matures on the earlier of July 15, 2027, or the date the Company ceases to utilize MUFG Union Bank, N.A.

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Permit the Consolidated Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than 2.50 to 1.

At March 31, 2023, the actual ratio was 4.12 to 1.

At June 30, 2023, the actual ratio was 3.82 to 1.

Permit the Consolidated Leverage Ratio at any time during any period of four consecutive fiscal quarters to be greater than 2.75 to 1.

At March 31, 2023, the actual ratio was 2.21 to 1.

At March 31, 2023, the Company was in compliance with each of the aforementioned covenants.

At June 30, 2023, the actual ratio was 2.18 to 1.

At June 30, 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.

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.

(“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.

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.

(“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.

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.

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.

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.

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 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.

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’

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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.

The Private Shelf Agreement expired March 31, 2023.

2.57% Senior Notes Due in 2028

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The full net proceeds from the Series D Senior Notes were used to pay off the Company’s $40 million Series B Senior Notes.

At March 31, 2023, the principal balance outstanding under the Series D Senior Notes was $40.0 million.

At June 30, 2023, the principal balance outstanding under the Series D Senior Notes was $40.0 million.

2.35% Senior Notes Due in 2026

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The Series E Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 2.35% per annum and mature on June 16, 2026.

Interest on the Series E Senior Notes is payable semi-annually beginning on December 16, 2021 and continuing thereafter on June 16 and December 16 of each year until maturity.

Interest on the Series E Senior Notes is payable semi-annually beginning on December 16, 2021 and continuing

thereafter on June 16 and December 16 of each year until maturity.

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 March 31, 2023, the principal balance outstanding under the Series E Senior Notes was $60.0 million.

At June 30, 2023, the principal balance outstanding under the Series E Senior Notes was $60.0 million.

Among other restrictions, the Note Purchase Agreement, which has superseded in its entirety the Prior NPA, under which the 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 to fixed charges as of the end of any fiscal quarter to be less than 2.50 to 1.

At March 31, 2023, the actual ratio was 4.12 to 1.

At June 30, 2023, the actual ratio was 3.82 to 1.

Permit the Consolidated Leverage Ratio of funded debt to EBITDA at any time during any period of four consecutive quarters to be greater than 2.75 to 1.

At March 31, 2023, the actual ratio was 2.21 to 1.

At March 31, 2023, the Company was in compliance with each of the aforementioned covenants.

At June 30, 2023, the actual ratio was 2.18 to 1.

At June 30, 2023, the Company was in compliance with each of the aforementioned covenants.

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There can be no assurance that any authorized shares will be repurchased and the Repurchase Plan may be modified, extended or terminated by the Company’s Board of Directors at any time.

There were no shares repurchased in the three

months ended March 31, 2023 and 2022.

As of March 31, 2023, 1,309,805 shares remained authorized for repurchase under the Repurchase Plan.

There were no shares repurchased in the six months ended June 30, 2023 and 2022.

As of June 30, 2023, 1,309,805 shares remained authorized for repurchase under the Repurchase Plan.

Contractual Obligations and Commitments

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Critical Accounting Estimates

There were no material changes in our judgments and assumptions associated with the development of our critical accounting estimates during the period ended March 31, 2023.

There were no material changes in our judgments and assumptions associated with the development of our critical accounting estimates during the period ended June 30, 2023.

Refer to our 2022 Annual Report for a discussion of our critical accounting policies and estimates.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements