What changed in this filing

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Item 1. Business

2024-02-21 compared with 2023-02-22 · 164 added, 228 removed, 135 unchanged (74% of the section changed)

General Overview

McGrath RentCorp (the “Company”) is a California corporation organized in 1979 with corporate offices located in Livermore, California.

The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “MGRC”.

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.

Although the Company’s primary emphasis is on equipment rentals, sales of equipment occur in the normal course of business.

McGrath RentCorp (the “Company”) is a California corporation organized in 1979 with corporate offices located in Livermore, California.

The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “MGRC”.

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.

Although the Company’s primary emphasis is on equipment rentals, sales of equipment occur in the normal course of business.

At December 31, 2023, 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”).

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.

(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”).

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.

On the same date, the Company acquired Vesta Housing Solutions Holdings, Inc.

("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.

(“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.

The financial results of Vesta Modular were a part of the Mobile Modular segment since February 1, 2023.

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”).

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

Second-Step Merger as a wholly owned subsidiary of WillScot Mobile Mini.

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.

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.

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.

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.

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.

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.

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.

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.

Business Model

The Company invests capital in rental products and generally has recovered its original investment through rents less cash operating expenses in a relatively short period of time compared to the product’s rental life.

When the Company’s rental products are sold, the proceeds generally have covered a high percentage of the original investment.

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 Company’s rental products have the following characteristics:

The product required by the customer tends to be expensive compared to the Company’s monthly rental charge, with the interim rental solution typically evaluated as a less costly alternative.

Generally, we believe the Company’s customers have a short-term need for our rental products.

The customer’s rental requirement may be driven by a number of factors including time, budget or capital constraints, future uncertainty impacting their ongoing requirements, equipment availability, specific project requirements, peak periods of demand or the customer may want to eliminate the burdens and risks of ownership.

All of the Company’s rental products have long useful lives relative to the typical rental term.

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.

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 the Company’s rental products are sold, the proceeds generally have covered a high percentage of the original investment.

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 Company’s rental products have the following characteristics:

• The product required by the customer tends to be expensive compared to the Company’s monthly rental charge, with the interim rental solution typically evaluated as a less costly alternative.

• Generally, we believe the Company’s customers have a short-term need for our rental products.

• All of the Company’s rental products have long useful lives relative to the typical rental term.

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.

• 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 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.

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Modular asset management requires designing and building the product for a long life, coupled with ongoing repair and maintenance investments, to ensure its long useful rental life and generally higher residuals upon sale.

Container asset management requires selecting and purchasing quality products and making ongoing repair and maintenance investments.

Steel containers have no technical obsolescence.

Electronic test equipment asset management requires understanding, selecting and investing in equipment technologies that support market demand and, once invested, proactively managing the equipment at the model level for optimum utilization through its technology life cycle to maximize the rental revenues and residuals realized.

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.

The Company believes that rental revenue growth from an increasing base of rental assets and improved gross profits on rents are the best measures of the health of each of our rental businesses.

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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.

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.

None of our employees are covered by a collective bargaining agreement, and management believes its relationship with our employees is good.

The Company believes its employees are key to its success and it is committed to all of its employees’

engagement, training and career development, and personal and professional 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 Company believes its employees are key to its success and it is committed to all of its employees’ engagement, training and career development, and personal and professional growth.

The Company provides training in technical, operational and leadership skills, and places special emphasis on safety, effective communications, customer service, and employee development.

Additionally, the Company offers employees a tuition reimbursement program whereby the employee may receive reimbursement for tuition and fees for undergraduate or graduate level academic courses at an accredited two or four year college or university that may help employees improve performance in their current job or prepare them for advancement.

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Our motor vehicles and related units are subject to regulation in certain states under motor vehicle and similar registrations.

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.

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.

These filings include our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Act of 1934, which are available as soon as reasonably practicable after the Company electronically files such material with, or furnishes such material to, the SEC.

Information included on our website is not incorporated by reference to this Form 10-K.

Furthermore, all reports the Company files with the SEC are available through the SEC’s website at www.sec.gov.

We have a Code of Business Conduct and Ethics which applies to all directors, officers and employees.

Copies of this code can be obtained at our website www.mgrc.com .

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.

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.

RELOCATABLE MODULAR BUILDINGS

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Modulars vary from simple single-unit construction site offices to multi-floor modular complexes.

The Company’s modular rental fleet includes a full range of styles and sizes.

The Company considers its modulars to be among the most attractive and well-designed available.

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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.

The Company believes that the loss of any of its primary modular manufacturers could have an adverse effect on its operations since Mobile Modular could experience higher prices and longer lead times for delivery of modular units until other manufacturers were able to increase their production capacity.

The Company’s modulars are manufactured to comply with state building codes, have a low risk of obsolescence, and can be modified or reconfigured to accommodate a wide variety of customer needs.

Historically, as state building codes have changed over the years, Mobile Modular has been able to continue to use existing modulars, with minimal, if any, required upgrades.

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 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.

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”).

Kitchens To Go provides interim and permanent modular kitchen solutions serving the United States from its inventory center in Indiana.

Mobile Modular operates from regional sales and inventory centers serving large geographic areas.

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.

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When rental equipment returns from a customer, the necessary repairs and preventative maintenance are performed prior to its next rental.

By making these expenditures for repair and maintenance throughout the equipment’s life we believe that older equipment can generally rent for rates similar to those of newer equipment.

Management believes the condition of the equipment is a more significant factor in determining the rental rate and sale price than its age.

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.

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.

Competitive Strengths

Market Leadership –

Mobile Modular has the leading modular building and container fleet in the United States.

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.

Management is knowledgeable about the needs of its educational customers and the related regulatory requirements in the states where Mobile Modular operates, which enables Mobile Modular to meet its customers’

specific project requirements.

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.

Strong Industry Position – Mobile Modular has a leading modular building fleet in the United States.

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.

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.

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Mobile Modular has expertise in project management and complex applications.

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.

Mobile Modular achieves this by building regional sales and inventory centers designed to serve a broad geographic area and a large installed customer base under a single overhead structure, thereby reducing its cost per transaction.

The Company’s regional facilities and related infrastructure enable Mobile Modular to maximize its modular inventory utilization through efficient and cost effective in-house repair, maintenance and refurbishment for quick redeployment of equipment to meet its customers’

Asset Management –

The Company believes Mobile Modular markets high quality, well-constructed and attractive modulars.

Asset Management – The Company believes Mobile Modular markets high quality, well-constructed and attractive modulars.

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.

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.

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.

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.

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.

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’

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.

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.

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with an aggregate original cost of over $5.0 billion.

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.

Management believes the demand for rental classrooms is caused by shifting and fluctuating school populations, the limited state funds for new construction, the need for temporary classroom space during reconstruction of older schools, class size reduction and the phasing out of portable classrooms compliant with older building codes (see “Classroom Rentals and Sales to Public Schools (K-12)”

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.

Other customer applications include sales offices, construction field offices, health care facilities, church sanctuaries and child care facilities.

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Modulars offer customers quick, cost-effective space solutions while conserving their capital.

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.

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.

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Because service is a major competitive factor in the rental of modulars, Mobile Modular offers quick response to requests for information, assistance in the choice of a suitable size and floor plan, in-house customization services, rapid delivery, timely installation and field service of its units.

On Mobile Modular’s website, customers are able to view and select inventory for quotation and request in-field service.

Rental periods range from one month to several years with a typical initial contract term between twelve and twenty four months.

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Upon return, the units are inspected for damage and customers are billed for items considered beyond normal wear and tear.

the units are then repaired for subsequent use.

Generally, the units are then repaired for subsequent use.

Repair and maintenance costs are expensed as incurred and can include floor repairs, roof maintenance, cleaning, painting and other cosmetic repairs.

The costs of major refurbishment of equipment are capitalized to the extent the refurbishment significantly improves the quality and adds value or life to the equipment.

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.

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, 2023, fleet utilization was 79.4% and average fleet utilization during 2023 was 79.7%.

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.

In addition to operating its rental fleet, Mobile Modular sells modulars to customers.

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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.

Mobile Modular typically provides limited 90-day warranties on used modulars and passes through the manufacturers’

one-year warranty on new units to its customers.

Warranty costs have not been significant to Mobile Modular’s operations to date, and the Company attributes this to its commitment to high quality standards and regular maintenance programs.

However, there can be no assurance that warranty costs will continue to be insignificant to Mobile Modular’s operations in the future.

Enviroplex manufactures portable classrooms built to the requirements of the California Division of the State Architect (“DSA”) and sells directly to California public school districts and other educational institutions.

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.

Mobile Modular typically provides limited 90-day warranties on used modulars and passes through the manufacturers’ one-year warranty on new units to its customers.

Warranty costs have not been significant to Mobile Modular’s operations to date, and the Company attributes this to its commitment to high quality standards and regular maintenance programs.

However, there can be no assurance that warranty costs will continue to be insignificant to Mobile Modular’s operations in the future.

Typically, during each calendar year, our highest numbers of classrooms are shipped for rental and sale orders during the second and third quarters for delivery and installation prior to the start of the upcoming school year.

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Competition in the rental and sale of relocatable modular buildings is intense.

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.

Mobile Modular operates primarily in California, the Pacific Northwest, Texas, Florida, Louisiana, North Carolina, South Carolina, Georgia, Virginia, Maryland and Washington, D.C.

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 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.

Part of the Company’s strategy for modulars is to create facilities and infrastructure capabilities that its competitors cannot easily duplicate.

The Company's facilities and related infrastructure enable it to modify modulars efficiently and cost effectively to meet its customers’

Part of the Company’s strategy for modulars is to create facilities and infrastructure capabilities that its competitors cannot easily duplicate.

The Company's facilities and related infrastructure enable it to modify modulars efficiently and cost effectively to meet its customers’ needs.

Management's goal is to be more responsive at less expense.

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Mobile Modular is determined to respond quickly to requests for information, and provide experienced assistance for the first-time user, rapid delivery and timely repair of its modular units.

Mobile Modular’s already high level of efficiency and responsiveness continues to improve as the Company upgrades procedures, processes and computer systems that control its internal operations.

The Company anticipates intense competition to continue and believes it must continue to improve its products and services to remain competitive in the market for modulars.

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Mobile Modular and Enviroplex provide classroom and specialty space needs serving public and private schools, colleges and universities.

Within the educational market, the rental (by Mobile Modular) and sale (by Enviroplex and Mobile Modular) of modulars to public school districts for use as portable classrooms, restroom buildings and administrative offices for kindergarten through grade twelve (K-12) are a significant portion of the Company’s revenues.

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.

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.

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.

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:

California is Mobile Modular’s largest educational market.

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.

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:

Rentals and Sales to Public Schools (K-12) as a Percentage of Total Rental and Sales Revenues

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Consolidated Rental and Sales Revenues 1

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.

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.

As a result of these changes, the rental and sales to public schools as a percentage of total rental and sales revenues for 2022 and 2021, have been restated to present the Mobile Modular and Enviroplex results from continuing operations only.

School Facility Funding

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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.

PORTABLE STORAGE CONTAINERS

Portable Storage’s rental inventory is comprised of steel containers used to provide a temporary storage solution that is delivered to the customer’s location and addresses the need for secure, temporary storage with immediate access to the unit.

The containers are comprised of the following products:

• Storage containers, which consist of new and used steel shipping containers certified under International Organization for Standardization (“ISO”) standards, that provide a flexible, low cost alternative to warehousing, while offering greater security, convenience and immediate accessibility.

Storage containers are made from weather-resistant corrugated steel and are 8 feet wide and available in lengths ranging from 8 to 53 feet, with 20-foot and 40-foot length containers being the most common.

• Office containers are either modified or specifically manufactured containers that provide self-contained office space with maximum design flexibility.

Office containers are often referred to as ground level offices (“GLOs”).

GLOs provide the advantage of ground level accessibility and high security.

Competitive Strengths

Strong Industry Position - The Company believes that Portable Storage is one of the largest participants in the temporary portable storage rental industry in North America.

Portable Storage has a national reach from branches serving the West, Pacific Northwest, Northeast, Mid-Atlantic, Southeast and Midwest.

Expertise and Customer Service – The Company believes that Portable Storage has highly experienced operating management and branch employees.

The 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.

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.

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.

Portable Storage rents its storage and office containers typically for rental periods of one to twelve months, although in some instances, rental terms can be over a year or longer.

Monthly rental rates typically are between 2% and 4% of the equipment’s original acquisition cost.

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.

Utilization was 71.5% at December 31, 2023 and averaged 77.3% during the year.

Rental activity may vary depending upon the extent of retail activity that typically occurs during the fourth quarter and the impact inclement weather may have on construction activity.

The portable storage container rental industry is highly competitive.

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.

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

availability, product quality, price and service.

Portable Storage may encounter increased competition from existing competitors or from new entrants in the future.

ELECTRONIC TEST EQUIPMENT

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”).

TRS-RenTelco’s revenues are derived from the rental and sale of general purpose and communications test equipment to a broad range of companies, from Fortune 500 to middle and smaller market companies, in the aerospace, defense, communications, manufacturing and semiconductor industries.

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 Dallas facility, TRS-RenTelco’s primary operating location, houses the electronic test equipment inventory, sales engineers, calibration laboratories, and operations staff for U.S.

and international business.

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These instruments are rented primarily to aerospace, defense, electronics, industrial, research and semiconductor industries.

To date, Keysight Technologies, Rhode & Schwarz and Tektronix, a division of Fortive Corporation, have manufactured the majority of TRS-RenTelco’s general purpose electronic test equipment with the remainder acquired from over 60 other manufacturers.

Communications test equipment, including fiber optic test equipment, is utilized by technicians, engineers and installation contractors to evaluate voice, data and multimedia communications networks, to install fiber optic cabling, and in the development and manufacturing of transmission, network and wireless products.

These instruments are rented primarily to manufacturers of communications equipment and products, electrical and communications installation contractors, field technicians, and service providers.

To date, Anritsu, Viavi Solutions and Fluke Networks, a division of Fortive Corporation, have manufactured a significant portion of TRS-RenTelco’s communications test equipment, with the remainder acquired from over 40 other manufacturers.

TRS-RenTelco’s general purpose test equipment rental inventory includes oscilloscopes, amplifiers, analyzers (spectrum, network and logic), signal source and power source test equipment.

The communications test equipment rental inventory includes network and transmission test equipment for various fiber, copper and wireless networks.

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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.

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.

Expertise - The Company believes that its knowledge of products, technology and applications expertise provides it with a competitive advantage over others in the industry.

Customer requirements are supported by application engineers and technicians that are knowledgeable about the equipment’s uses to ensure the right equipment is selected to meet the customer’s needs.

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.

The Company believes that the centralization of servicing all customers in North America and internationally by TRS-RenTelco’s experienced logistics teams provides a competitive advantage by minimizing transaction costs and enabling TRS-RenTelco to ensure customer requirements are met.

Asset Management - TRS-RenTelco’s rental equipment inventory is serviced by an ISO 9001-2015 registered and compliant calibration laboratory that repairs and calibrates equipment ensuring that off rent equipment is ready to ship immediately to meet customers’

TRS-RenTelco’s team of technicians, product managers and sales personnel are continuously monitoring and analyzing the utilization of existing products, new technologies, general economic conditions and estimates of customer demand to ensure the right equipment is purchased and sold, at the right point in the equipment’s technology life cycle.

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.

The Company believes this enables it to maximize utilization of equipment and the cash flow generated by the rental and sales revenue of each model of equipment.

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TRS-RenTelco strives to provide exemplary service to fulfill its commitments to its customers.

TRS-RenTelco prides itself in providing solutions to meet customers’

needs by having equipment available and responding quickly and thoroughly to their requests.

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.

TRS-RenTelco prides itself

in providing solutions to meet customers’ needs by having equipment available and responding quickly and thoroughly to their requests.

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.

Electronic test equipment rental is a market which we estimate has equipment on rent worldwide or available for rent with an aggregate original cost in excess of $1 billion.

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TRS-RenTelco attracts customers through its outside sales force, website at www.TRSRenTelco.com, telemarketing program, trade show participation, paid internet search and electronic mail campaigns.

A key part of the sales process is TRS-RenTelco’s knowledgeable inside sales engineering team that effectively matches test equipment solutions to meet specific customer’s requirements.

The Company believes that customers rent electronic test equipment for many reasons.

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The Company also believes that the relative certainty of rental costs can facilitate cost control and be useful in the bidding of and pass-through of contract costs.

Finally, renting rather than purchasing may better satisfy the customer’s budgetary constraints.

TRS-RenTelco rents electronic test equipment typically for rental periods of one to six months, although in some instances, rental terms can be up to a year or longer.

Monthly rental rates typically are between 2% and 10% of the current manufacturers’

Monthly rental rates typically are between 2% and 10% of the current manufacturers’ list price.

TRS-RenTelco depreciates its equipment over 1 to 8 years with no residual value.

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Utilization was 55.9% as of December 31, 2023 and averaged 58.9% during the year.

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.

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In 2023, approximately 18% of the electronic test equipment revenues were derived from sales.

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.

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.

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Rental activity may decline in the fourth quarter month of December and the first quarter months of January and February.

operational recovery from holiday closures which may impact the start-up of new projects coming online in the first quarter.

These factors may impact the quarterly results of each year’s first and fourth quarter.

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 months may have lower rental activity due to holiday closures, particularly by larger companies, inclement weather and its impact on various field related communications equipment rentals, and companies’ operational recovery from holiday closures which may impact the start-up of new projects coming online in the first quarter.

These factors may impact the quarterly results of each year’s first and fourth quarter.

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.

TRS-RenTelco competes with these and other test equipment rental companies on the basis of product availability, price, service and reliability.

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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.

LIQUID AND SOLID CONTAINMENT TANKS AND BOXES

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.

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;

roll-off and trash boxes for the temporary storage and transport of solid waste.

Adler Tanks purchases tanks and boxes from various manufacturers located throughout the country.

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.

Expertise 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.

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 fleet’s utilization is regionally optimized by understanding key vertical market customer demand, seasonality factors, competitor’s product availability and expected equipment returns.

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.

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.

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.

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.

Utilization was 57.1% at December 31, 2022 and averaged 53.1% during the year.

Rental activity may decline in the fourth quarter month of December and the first quarter months of January and February.

These months may have lower rental activity due to inclement weather in certain regions of the country impacting the industries that we serve.

The liquid and solid containment rental industry is highly competitive including national, regional and local companies.

Some of our national competitors, notably United Rentals and Rain For Rent, may be larger than we are and may have greater financial and other resources than we have.

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.

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.

Adler Tanks may encounter increased competition in the markets that it serves from existing competitors or from new market entrants in the future.

REPORTABLE SEGMENTS

For segment information regarding the Company’s four reportable business segments:

Mobile Modular, TRS-RenTelco, Adler Tanks and Enviroplex, see “Note 13.

Segment Reporting”

to the audited consolidated financial statements of the Company included in “Item 8.

Financial Statements and Supplementary Data.”

PRODUCT HIGHLIGHTS

The following table shows the revenue components, percentage of rental and total revenues, rental equipment (at cost), rental equipment (net book value), number of relocatable modular units, year-end and average utilization, average rental equipment (at cost), annual yield on average rental equipment (at cost) and gross margin on rental revenues and sales by product line for the past five years.

Product Highlights

(dollar amounts in thousands)

Year Ended December 31,

Relocatable Modular Buildings (operating under Mobile Modular and Enviroplex)

Rental related services

Total Modular rental operations

Sales —

Mobile Modular

Sales —

Total Modular sales

Total Modular revenues

Percentage of rental revenues

Percentage of total revenues

Rental equipment, at cost (year-end)

Rental equipment, net book value (year-end)

Number of units (year-end)

Utilization (year-end) 1

Average utilization 1

Average rental equipment, at cost 2

Annual yield on average rental equipment, at cost 4

Gross margin on rental revenues

Gross margin on sales

Electronic Test Equipment (operating under

TRS-RenTelco)

Rental related services

Total Electronics rental operations

Total Electronics revenues

Percentage of rental revenues

Percentage of total revenues

Rental equipment, at cost (year-end)

Rental equipment, net book value (year-end)

Utilization (year-end) 1

Average utilization 1

Average rental equipment, at cost 3

Annual yield on average rental equipment, at cost 4

Gross margin on rental revenues

Gross margin on sales

(dollar amounts in thousands)

Year Ended December 31,

Liquid and Solid Containment Tanks and Boxes

(operating under Adler Tanks)

Rental related services

Total Tanks and Boxes rental operations

Total Tanks and Boxes revenues

Percentage of rental revenues

Percentage of total revenues

Rental equipment, at cost (year-end)

Rental equipment, net book value (year-end)

Utilization (year-end) 1

Average utilization 1

Average rental equipment, at cost 2

Annual yield on average rental equipment, at cost 4

Gross margin on rental revenues

Gross margin on sales

Total revenues

Utilization is calculated each month by dividing the cost of rental equipment on rent by the total cost of rental equipment.

Average utilization is calculated using the average cost of equipment for the year.

Average rental equipment, at cost for modulars and tanks and boxes excludes new equipment inventory and accessory equipment.

Average rental equipment, at cost, for electronics excludes accessory equipment.

Annual yield on average rental equipment, at cost is calculated by dividing the total annual rental revenues by the average rental equipment, at cost.

For segment information regarding the Company’s four reportable business segments:

Mobile Modular, Portable Storage, TRS-RenTelco and Enviroplex, see “Note 15.

Segment Reporting” to the audited Consolidated Financial Statements of the Company included in “Item 8.

Financial Statements and Supplementary Data.”

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-K

Item 1. Business