What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-21 compared with 2023-02-22 · 465 added, 336 removed, 651 unchanged (55% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Management’s Report on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

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Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statements of Shareholders’

Equity for the Years Ended December 31, 2022, 2021 and 20 20

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021

Notes to Consolidated Financial Statements

Management’s Report on Internal C ontrol over Financial Reporting

The Company’s management is responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual Report filed on Form 10-K.

The consolidated financial statements were prepared in conformity with United States generally accepted accounting principles and include amounts based on management’s estimates and judgments.

All other financial information in this report has been presented on a basis consistent with the information included in the financial statements.

The Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.

Management’s Report on Internal C ontrol over Financial Reporting

The Company’s management is responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual Report filed on Form 10-K.

The consolidated financial statements were prepared in conformity with United States generally accepted accounting principles and include amounts based on management’s estimates and judgments.

All other financial information in this report has been presented on a basis consistent with the information included in the consolidated financial statements.

The Company maintains a system of internal control that is designed to provide reasonable assurance as to the reliable preparation and presentation of the consolidated financial statements, as well as to safeguard assets from unauthorized use or disposition.

The Company’s system of internal control over financial reporting is embodied in the Company’s Code of Business Conduct and Ethics.

It sets the tone of our organization and includes factors such as integrity and ethical values.

Our internal control over financial reporting is supported by formal policies and procedures, which are reviewed, modified and improved as changes occur in business conditions and operations.

On February 1, 2023, McGrath RentCorp completed its acquisition of Vesta Modular Housing Solutions Holdings, Inc.

("Vesta Modular"), as discussed in Note 4.

Acquisitions.

Management has excluded Vesta Modular's internal controls from its assessment of the effectiveness of internal controls over financial reporting as of December 31, 2023.

Vesta Modular's revenues and total assets (excluding goodwill and intangible assets) represents approximately 13 and 14 percent, respectively, of the consolidated financial statement amounts as of, and for the fiscal year ended, December 31, 2023.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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The independent auditors report to the Audit Committee and accordingly have full and free access to the Audit Committee at any time.

The Company’s management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria set forth in the 2013 Internal Control —

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on its evaluation, management has concluded that, as of December 31, 2022, the Company’s internal control over financial reporting was effective based on those criteria.

The Company’s management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023 based on the criteria set forth in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on its evaluation, management has concluded that, as of December 31, 2023, the Company’s internal control over financial reporting was effective based on those criteria.

Report of Independent Regist ered Public Accounting Firm

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Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of McGrath RentCorp (a California corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated February 22, 2023 expressed an unqualified opinion on those financial statements.

We have audited the internal control over financial reporting of McGrath RentCorp (a California corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated February 21, 2024 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Vesta Housing Solutions Holdings, Inc.

(“Vesta Modular”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 14 and 13 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

As indicated in Management’s Report, Vesta Modular was acquired during 2023.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Vesta Modular.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of McGrath RentCorp (a California corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’

equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of McGrath RentCorp (a California corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2023 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 21, 2024 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Customer Relationships Intangible Asset Acquired through Vesta Modular Acquisition

As described further in Note 4 to the financial statements, the Company completed the purchase of substantially all of the assets of Vesta Housing Solutions Holdings, Inc.

(“Vesta Modular”) for $437.2 million in cash consideration.

The acquisition was accounted for as a purchase of a “business” in accordance with criteria in Accounting Standards Certification (ASC) 805 – Business Combinations using the purchase method of accounting.

We identified the valuation of the acquired customer relationships asset as a critical audit matter.

The principal considerations for our determination that the Company’s assessment of the fair value of the acquired customer relationships asset represents a critical audit matter is that the judgments and key assumptions made in assessing the fair value of the customer relationship are complex and subjective.

The significant assumptions utilized to determine the fair value included projected future cash

flows, associated discount rates used to calculate present value, customer attrition rates, and other assumptions that form the basis of the forecasted results.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

Our audit procedures related to the valuation of the customer relationships asset from the acquisition of Vesta Modular included the following, among others:

We inspected the purchase agreement and evaluated management’s process for identifying and estimating the fair value of the acquired customer relationships asset.

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its valuation of the acquired customer relationships asset, including determination of the underlying assumptions.

We evaluated the Company's selection of the valuation methodology and significant assumptions for reasonableness.

We compared management’s assumptions used to develop the discount rates to the weighted average cost of capital of guideline public companies.

Additionally, we compared the significant assumptions related to prospective financial information to the industry.

We also performed a sensitivity analysis of the significant assumptions to evaluate the impact on the concluded fair value that would result from changes in assumptions.

We reviewed the qualifications of the external third-party valuation specialist engaged by management in the fair value determination.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2002.

San Francisco, California

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(in thousands)

Accounts receivable, net of allowance for credit losses of $ 2,300 in 2022 and $ 2,125 in 2021

Accounts receivable, net of allowance for credit losses of $ 2,801 at December 31, 2023 and $ 2,300 at December 31, 2022

Rental equipment, at cost:

Relocatable modular buildings

Portable storage containers

Electronic test equipment

Liquid and solid containment tanks and boxes

accumulated depreciation

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Intangible assets, net

Assets of discontinued operations

Liabilities and Shareholders' Equity

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Deferred income taxes, net

Liabilities of discontinued operations

Total liabilities

Commitments and contingencies (Note 12)

Shareholders’

Shareholders’ equity:

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

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Accumulated other comprehensive loss

Total shareholders’

Total liabilities and shareholders’

Total shareholders’ equity

Total liabilities and shareholders’ equity

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

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Income from operations

Other (expense) income:

Interest expense

Foreign currency exchange (loss) gain

Income before provision for income taxes

Provision for income taxes

Foreign currency exchange gain (loss)

Income from continuing operations before provision for income taxes

Provision for income taxes from continuing operations

Income from continuing operations

Discontinued operations:

Income from discontinued operations before provision for income taxes

Provision for income taxes from discontinued operations

Gain on sale of discontinued operations, net of tax

Income from discontinued operations

Earnings per share from continuing operations:

Earnings per share from discontinued operations:

Earnings per share:

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(in thousands)

Other comprehensive (loss) income:

Other comprehensive income:

Foreign currency translation adjustment, net of tax impact

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Comprehensive

Shareholders’

(in thousands, except per share amounts)

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withheld for employee taxes

Repurchased common stock

Taxes paid related to net share settlement of stock awards

Dividends accrued at $ 1.74 per share

Other comprehensive loss

Other comprehensive income

Balance at December 31, 2021

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Dividends accrued at $ 1.82 per share

Other comprehensive income

Other comprehensive loss

Balance at December 31, 2022

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Share-based compensation

Gain on sale of property, plant and equipment

Gain on sale of discontinued operations

Gain on sale of used rental equipment

Foreign currency exchange loss

Foreign currency exchange (gain) loss

Amortization of debt issuance costs

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Cash Flows from Investing Activities:

Proceeds from sale of discontinued operations

Purchases of rental equipment

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Cash paid for acquisition of businesses

Cash paid for acquisition of Titan business assets

Cash paid for acquisition of business assets

Cash paid for acquisition of non-compete agreements

Proceeds from sales of used rental equipment

Proceeds from sales of property, plant and equipment

Net cash used in investing activities

Cash Flows from Financing Activities:

Net borrowings (payments) borrowings under bank lines of credit

Borrowings under note purchase agreement

Net borrowings under bank lines of credit

Borrowings under senior note purchase agreement

Principal payment of Series C senior notes

Principal payment of Series B senior notes

Repurchase of common stock

Taxes paid related to net share settlement of stock awards

Payment of dividends

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

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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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

McGrath RentCorp and its wholly-owned subsidiaries (the “Company”) is a California corporation organized in 1979.

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 and its wholly-owned subsidiaries (the “Company”) is a California corporation organized in 1979.

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:

modular building and portable storage segment (“Mobile Modular”), electronic test equipment segment (“TRS-RenTelco”), containment solutions for the storage of hazardous and non-hazardous liquids and solids segment (“Adler Tanks”) and classroom manufacturing division selling modular classrooms in California (“Enviroplex”).

modular building segment ("Mobile Modular"), portable storage container segment (“Portable Storage”), electronic test equipment segment (“TRS-RenTelco”) and classroom manufacturing division selling modular classrooms in California (“Enviroplex”).

Agreement and Plan of Merger with WillScot Mobile Mini Holdings Corp.

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 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.

Pursuant to the terms of the Merger Agreement, the closing of the Merger Agreement is subject to the satisfaction of customary closing conditions, including adoption of the Merger Agreement by the Company’s shareholders and receipt of regulatory approvals.

The closing of the Transaction is not subject to any financing condition.

Principles of Consolidation

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Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned.

Rental related services revenues are primarily associated with relocatable modular building and liquid and solid containment tanks and boxes leases.

Rental related services revenues are primarily associated with relocatable modular building and portable storage container leases.

For modular building leases, rental related services revenues for modifications, delivery, installation, dismantle and return delivery are lease related because the payments are considered minimum lease payments that are an integral part of the negotiated lease agreement with the customer.

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Certain leases are accounted for as sales-type leases.

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.

return on the unrecovered lease investment.

Other revenues include interest income on sales-type leases and rental income on facility leases.

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Revenue from contracts that satisfy the criteria for over-time recognition are recognized as work is performed by using the input method based on the ratio of costs incurred to estimated total contract costs for each contract.

The majority of revenue for these contracts is derived from long-term projects which typically span multiple quarters.

The Company uses third parties to provide certain services as part of its contracts with customers.

The Company is considered the principal (vs.

an agent) as the Company is responsible for the fulfillment of all service elements and risks associated with the underlying performance obligation.

Revenue for these services is recognized on a gross basis.

Other revenue is recognized when earned and primarily includes interest income on sales-type leases, rental income on facility leases and certain logistics services.

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Rental equipment is depreciated on a straight-line basis for financial reporting purposes and on an accelerated basis for income tax purposes.

The costs of major refurbishment of relocatable modular buildings, portable storage containers and tanks and boxes are capitalized to the extent the refurbishment significantly adds value to, or extends the life of the equipment.

The costs of major refurbishment of relocatable modular buildings and portable storage containers are capitalized to the extent the refurbishment significantly adds value to, or extends the life of the equipment.

Maintenance and repairs are expensed as incurred.

The estimated useful lives and residual values of the Company’s rental equipment used for financial reporting purposes are as follows:

Relocatable modular buildings

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1 to 8 years , no residual value

Liquid and solid containment tanks and boxes and accessories

3 to 20 years , no residual value

Costs of Rental Related Services

Costs of rental related services are primarily associated with relocatable modular building leases and liquid and solid containment tank and boxes.

Costs of rental related services are primarily associated with relocatable modular building and portable storage container leases.

Modular building leases primarily consist of costs for services to be provided under the negotiated lease agreement for delivery, installation, modifications, skirting, additional site-related work, and dismantle and return delivery.

Costs related to these services are recognized on a straight-line basis over the term of the lease.

Costs of rental related services associated with liquid and solid containment solutions consists of costs of delivery, removal and cleaning of the tanks and boxes.

Costs of rental related services associated with portable storage containers consists of costs of delivery, removal and cleaning of the containers.

These costs are recognized in the period the service is performed.

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The Company evaluates the carrying value of rental equipment and identifiable definite lived intangible assets for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable.

A key element in determining the recoverability of long-lived assets is the Company’s outlook as to the future market conditions for its rental equipment.

If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value.

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Warranty Reserves

Sales of new relocatable modular buildings, portable storage containers, electronic test equipment and related accessories and liquid and solid containment tanks and boxes not manufactured by the Company are typically covered by warranties provided by the manufacturer of the products sold.

Sales of new relocatable modular buildings, portable storage containers, electronic test equipment and related accessories not manufactured by the Company are typically covered by warranties provided by the manufacturer of the products sold.

The Company typically provides limited 90 -day warranties for certain sales of used rental equipment and one-year warranties on equipment manufactured by Enviroplex.

Although the Company’s policy is to provide reserves for warranties when required for specific circumstances, the Company has not found it necessary to establish such reserves to date as warranty costs have not been significant.

Property, Plant and Equipment

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Depreciation is recognized on a straight-line basis for financial reporting purposes, and on an accelerated basis for income tax purposes.

Depreciation expense for property, plant and equipment is included in “Selling and administrative expenses”

and “Rental related services”

in the Consolidated Statements of Income.

Depreciation expense for property, plant and equipment is included in “Selling and administrative expenses” and “Rental related services” in the Consolidated Statements of Income.

Maintenance and repairs are expensed as incurred.

Property, plant and equipment consist of the following:

Property, plant and equipment from continuing operations consist of the following:

(dollar amounts in thousands)

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Property, plant and equipment depreciation expense was $ 9.7 million, $ 9.0 million and $ 8.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Construction in progress at December 31, 2022 and 2021 consisted primarily of costs related to acquisition of land, land improvements and information technology upgrades.

Construction in progress at December 31, 2023 and 2022 consisted primarily of costs related to acquisition of land and land improvements.

For information on the property, plant and equipment from discontinued operations, refer to Note 5.

Capitalized Software Costs

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The Company capitalized less than $ 0.2 million and $ 0.1 million in internal use software during the years ended December 31, 2023 and 2022, respectively.

Shipping Costs

The Company includes third party costs to deliver rental equipment to customers in costs of rental related services and costs of sales.

Advertising Costs

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A valuation allowance would be established if, based on the weight of available evidence, management believes that it is more likely than not that some portion or all of a recorded deferred tax asset would not be realized in future periods.

To the extent adjustments are required in any given period, the adjustments would be included within the “Provision for income taxes”

in the Consolidated Statements of Income.

To the extent adjustments are required in any given period, the adjustments would be included within the “Provision for income taxes” in the Consolidated Statements of Income.

Goodwill and Intangible Assets

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Based on these values, the excess purchase prices over the fair value of the net assets acquired are allocated to goodwill.

At December 31, 2022 and 2021, goodwill and trade name intangible assets which have indefinite lives totaled $ 138.2 million and $ 138.3 million, respectively.

The Company assesses potential impairment of its goodwill and intangible assets when there is evidence that events or circumstances have occurred that would indicate the recovery of an asset’s carrying value is unlikely.

At December 31, 2023 and 2022, goodwill and trade name intangible assets from continuing operations which have indefinite lives totaled $ 323.2 million and $ 106.4 million, respectively.

For information on goodwill and trade name intangible assets from discontinued operations, refer to Note 5.

The Company also assesses potential impairment of its goodwill and intangible assets with indefinite lives on an annual basis regardless of whether there is evidence of impairment.

If indicators of impairment were to be present in intangible assets used in operations and future discounted cash flows

were not expected to be sufficient to recover the assets’

carrying amount, an impairment loss would be charged to expense in the period identified.

The amount of an impairment loss would be recognized as the excess of the asset’s carrying value over its fair value.

If indicators of impairment were to be present in intangible assets used in operations and future discounted cash flows were not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified.

The amount of an impairment loss would be recognized as the excess of the asset’s carrying value over its fair value.

Factors the Company considers important, which may cause impairment include, among others, significant changes in the manner of use of the acquired asset, negative industry or economic trends, and significant underperformance relative to historical or projected operating results.

The impairment review of the Company’s goodwill is performed by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The fair value of the reporting unit is compared to its carrying value to determine if the goodwill is impaired.

If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, then goodwill is not impaired.

If the carrying value of the net assets assigned to the reporting unit were to exceed its fair value, then a goodwill impairment loss is recorded for the amount the reporting unit’s carrying value exceeds the estimated fair value.

The Company conducted its annual impairment analysis in the fourth quarter of 2023.

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Earnings Per Share

Basic earnings per share (“EPS”) is computed as net income divided by the weighted average number of shares of common stock outstanding for the period.

Diluted EPS is computed assuming conversion of all potentially dilutive securities including the dilutive effects of stock options, unvested restricted stock awards and other potentially dilutive securities.

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The Company has 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.

In August 2015, the Company’s Board of Directors authorized the Company to repurchase up to 2,000,000 shares of the Company's outstanding common stock (the “Repurchase Plan”).

The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management’s discretion.

In August 2015, the Company’s Board of Directors authorized the Company to repurchase up to 2,000,000 shares of the Company's outstanding common stock (the “Repurchase Plan”).

The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management’s discretion.

All shares repurchased by the Company are canceled and returned to the status of authorized but unissued shares of common stock.

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In the twelve months ended December 31, 2023, 2022 and 2021 there were no shares of common stock repurchased.

In the twelve months ended December 31, 2020, the Company repurchased 282,221 shares of its common stock for an average purchase price of $ 48.25 per share or an aggregate price of $ 13.6 million.

As of December 31, 2023, 1,309,805 shares remain authorized for repurchase.

Accounts Receivable and Concentration of Credit Risk

The Company’s accounts receivable consist of amounts due from customers for rentals, sales, financed sales and unbilled amounts for the portion of modular building end-of-lease services earned, which were negotiated as part of the lease agreement.

Unbilled receivables related to end-of-lease services, which consists of dismantle and return delivery of buildings, were $ 59.5 million at December 31, 2023 and $ 52.6 million at December 31, 2022.

The Company sells primarily on 30 -day terms, individually performs credit evaluation procedures on its customers on each transaction and will require security deposits from its customers when a significant credit risk is identified.

The Company records an allowance for doubtful accounts in amounts equal to the estimated losses expected to be incurred in the collection of the accounts receivable.

The estimated losses are based on historical collection experience in conjunction with an

evaluation of the current status of the existing accounts.

Customer accounts are written off against the allowance for doubtful accounts when an account is determined to be uncollectable.

The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts receivable from operating lease and non-lease revenues.

The Company regularly reviews the allowance by considering factors such as historical payment experience and trends, the age of the accounts receivable balances, the Company’s operating segment, customer industry, credit quality and current economic conditions that may affect a customer’s ability to pay.

The Company recognized bad debt expense of $ 0.8 million, $ 0.5 million and $ 1.3 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively.

The allowance for doubtful accounts was $ 2.3 million for the year ended December 31, 2022 and $ 2.1 million for the years ended 2021 and 2020.

The allowance for doubtful accounts activity was as follows:

The Company records an allowance for credit losses in amounts equal to the estimated losses expected to be incurred in the collection of the accounts receivable.

The estimated losses are based on historical collection experience in conjunction with an evaluation of the current status of the existing accounts.

Customer accounts are written off against the allowance for credit losses when an account is determined to be uncollectable.

The allowance for credit losses is based on the Company’s assessment of the collectability of customer accounts receivable from operating lease and non-lease revenues.

The Company recognized credit losses of $ 2.6 million, $ 0.8 million and $ 0.5 million for the twelve months ended December 31, 2023, 2022 and 2021, respectively.

The allowance for credit losses was $ 2.8 million, $ 2.3 million and $ 2.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The allowance for credit loss activity was as follows:

(in thousands)

Beginning balance, January 1

Provision for doubtful accounts

Acquired Design Space Reserve (see Note 14)

Provision for credit losses

Acquired reserve from Vesta Modular (see Note 4)

Derecognition of reserve from discontinued operations (see Note 5)

Write-offs, net of recoveries

6 unchanged sentences

The net investment in sales-type leases was $ 3.7 million at December 31, 2023 and $ 4.5 million at December 31, 2022.

The Company’s assessment of current expected losses on these receivables was not material and no credit loss expense was provided as of December 31, 2022.

The Company’s assessment of current expected losses on these receivables was not material and no credit loss expense was provided as of December 31, 2023.

The Company regularly reviews the allowance by considering factors such as historical payment experience, the age of the lease receivable balances, credit quality and current economic conditions that may affect a customer's ability to pay.

6 unchanged sentences

The Company believes that the carrying amounts for cash, accounts receivable, accounts payable and notes payable approximate their fair values except for fixed rate debt included in notes payable which has an estimated fair value of $ 169.2 million and $ 89.3 million compared to the recorded value of $ 175.0 million and $ 100.0 million as of December 31, 2023 and 2022, respectively.

The estimates of fair value of the Company’s fixed rate debt are based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities.

Foreign Currency Transactions and Translation

The Company's Canadian subsidiary, TRS-RenTelco Inc., a British Columbia corporation (“TRS-Canada”), functions as a branch sales office for TRS-RenTelco in Canada.

The functional currency for TRS-Canada is the U.S.

Foreign currency transaction gains and losses of TRS-Canada are reported in the results of operations in the period in which they occur.

The Company’s Indian subsidiary, TRS-RenTelco India Private Limited (“TRS-India”), functioned as a rental and sales office for TRS-RenTelco in India, which commenced its closure during 2017.

The functional currency for TRS-India is the Indian Rupee.

3 unchanged sentences

Share-Based Compensation

The Company measures and recognizes the compensation expense for all share-based awards made to employees and directors, including stock options, stock appreciation rights (“SARs”) and restricted stock units (“RSUs”), based upon estimated fair values.

The fair value of stock options and SARs is estimated on the date of grant using the Black-Scholes option pricing model and for RSUs based upon the fair market value of the underlying shares of common stock as of the date of grant.

3 unchanged sentences

The Company recognizes forfeitures based on actual forfeitures when they occur.

The Company records share-based compensation costs in “Selling and administrative expenses”

in the Consolidated Statements of Income.

The Company recognizes a benefit from share-based compensation in the Consolidated Statements of Shareholders’

Equity if an incremental tax benefit is realized.

Further information regarding share-based compensation can be found in “

Note 8 –

Benefit Plans”.

The Company records share-based compensation costs in “Selling and administrative expenses” in the Consolidated Statements of Income.

The Company recognizes a benefit from share-based compensation in the Consolidated Statements of Shareholders’ Equity if an incremental tax benefit is realized.

Further information regarding share-based compensation can be found in Note 10.

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates.

The most significant estimates included in the financial statements are the future cash flows and fair values used to determine the recoverability of the rental equipment and identifiable definite and indefinite lived intangible assets carrying value, the various assets’

useful lives and residual values, and the allowance for doubtful accounts.

In addition, determining the fair value of the assets and liabilities acquired in a business or asset acquisition can be judgmental in nature and can involve the use of significant estimates and assumptions.

NEW ACCOUNTING PRONOUNCEMENTS

In March 2022, the FASB issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures, which eliminates the separate recognition and measurement guidance for troubled debt restructurings by creditors.

In addition, the ASU requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of FASB ASC 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost.

This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

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

On March 27, 2023, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2023-01, Leases (Topic 842):

Common Control Arrangements, which requires a lessee involved in a common control lease agreement to amortize leasehold improvements over the useful life of the improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset.

If the lessor obtains the right to control the use of the underlying asset through a lease with another entity not within the same control group, the amortization period cannot exceed the period of the common control group.

Furthermore, the ASU requires the accounting for a transfer between entities under common control through an adjustment to equity when the lessee no longer controls the use of the underlying asset.

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

The Company is in the process of evaluating the financial statement impact of this ASU.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280), which will require public companies to provide more transparency in both quarterly and annual reports about the expenses they incur from revenue generating reportable business segments.

In addition, the ASU requires that a public entity disclose significant segment expenses that are regularly provided to the chief operating decision maker, an amount for

other segment items by reportable business segment, including a description of its composition, and the primary measures of a business segment's profit or loss in assessing segment performance.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is in the process of evaluating the financial statement impact of this ASU.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes—Improvements to Income Tax Disclosures (Topic 740), which will require Companies to disclose annually the specific categories in income tax rate reconciliations, provide additional information for reconciling items which meet a quantitative threshold, and disaggregate domestic and foreign income or loss from continuing operations.

Additionally, this ASU will also require the disclosure of income tax expense or benefit from continuing operations disaggregated by federal, state and foreign.

This ASU is effective for fiscal years beginning after December 15, 2024, and applied on a prospective basis.

The Company is in the process of evaluating the financial statement impact of this ASU.

IMPLEMENTED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2021, the Company adopted the Financial Accounting Standards Board’s Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, expected to reduce cost and complexity related to the accounting for income taxes.

The ASU removed specific exceptions to the general principles in Topic 740 (GAAP).

It eliminated the need for an organization to analyze whether the following apply in a given period:

exception to the incremental approach for intra-period tax allocation;

exceptions to accounting for basis differences when there are ownership changes in foreign investments;

and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The ASU also improved financial statement preparers’

application of income tax-related guidance and simplifies GAAP for:

franchise taxes that are partially based on income;

transactions with a government that result in a step up in the tax basis of goodwill;

separate financial statements of legal entities that are not subject to tax;

and enacted changes in tax laws in interim periods.

The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2023, the Company adopted the Financial Accounting Standards Board's Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures, which eliminated the separate recognition and measurement guidance for troubled debt restructurings by creditors.

The adoption of this new guidance did not have a material impact on the Company's consolidated financial statements.

Effective January 1, 2023, the Company adopted the ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers.

Additionally, the ASU requires revenue contracts, including contract assets and liabilities, to be evaluated on the acquisition date and reported as if the contracts had originated with the acquirer, resulting in a measurement consistent with the recognition on the acquiree's financial statements.

The adoption of this new guidance did not have a material impact on the Company's consolidated financial statements.

On February 1, 2023, the Company completed the acquisition of Vesta Housing Solutions Holdings, Inc.

(“Vesta Modular”), a portfolio company of Kinderhook Indus tries, for $ 437.2 million cash consideration on the closing date, which included certain adjustments, including net working capital and certain qualified capital expenditures.

In connection with the acquisition, the Company purchased a representation and warranty insurance policy to provide certain recourse in the event of breaches of representations and warranties of Vesta Modular and the seller of Vesta Modular under the stock purchase agreement.

Vesta Modular was a leading provider of temporary and permanent modular space solutions serving customers between its modular leasing and modular construction divisions.

The acquisition was accounted for as a purchase of a “business” in accordance with criteria in Accounting Standards Codification ("ASC") 805, Business Combinations , using the purchase method of accounting.

Under the purchase method of accounting, the total purchase price is assigned to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values on the closing date.

The excess of the purchase price over those fair values is recorded as goodwill.

The financial results of Vesta Modular were a part of the Mobile Modular segment since February 1, 2023, including $ 7.7 million of acquisition related transaction costs incurred during the current year as a result of the acquisition.

On March 1, 2023, the Company completed the acquisition of Jerald R.

Brekke, Inc., DBA Brekke Storage ("Brekke Storage"), for a total purchase price of $ 16.4 million.

Brekke Storage was a regional provider of portable storage solutions in the Colorado market.

The acquisition expanded the Portable Storage fleet by approximately 2,700 units and provided a new regional operation to serve the Colorado market.

The acquisition was accounted for as a purchase of a “business” in accordance with criteria in ASC 805 using the purchase method of accounting.

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

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

Dixie Storage was 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 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 using the purchase method of accounting.

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

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

Inland Leasing was 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 Portable Storage fleet by approximately 600 units, which will further support the Colorado market.

The acquisition was accounted for as a purchase of "assets" in accordance with criteria in ASC 805 and the assessment of the fair value of the purchased assets was allocated primarily to rental equipment totaling $ 3.0 million and intangible assets totaling $ 0.7 million.

Supplemental pro forma information has not been provided as the historical financial results of Inland Leasing were not significant.

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

The following tables summarize the purchase price allocations reflecting estimated fair values of assets acquired and liabilities assumed in the Vesta Modular, Brekke Storage and Dixie Storage business 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.

Accordingly, the Company has made provisional estimates for the assets acquired and liabilities assumed.

The valuation of intangible assets acquired is based on certain valuation assumptions including cash flow projections, discount rates, contributory asset charges and other valuation model inputs.

The valuation of tangible long-lived assets acquired is dependent upon various analyses including an analysis of the condition and estimated remaining economic lives of the assets acquired.

Vesta Modular:

(dollar amounts in thousands)

Rental equipment

Intangible assets:

Customer relationships

Accounts receivable

Property, plant and equipment

Prepaid expenses and other assets

Accounts payable and accrued liabilities

Deferred income

Deferred income taxes

Total purchase price

Brekke Storage:

(dollar amounts in thousands)

Rental equipment

Intangible assets:

Customer relationships

Property, plant and equipment

Deferred income

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 $ 216.8 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.

The trade name intangible acquired from the Vesta Modular acquisition will be amortized over it's useful life of nine months .

Goodwill is expected to have an indefinite life and will be subject to future impairment testing.

The goodwill is deductible for tax purposes over 15 years.

The following unaudited supplemental pro forma financial information shows the combined results of continuing operations of the Company and Vesta Modular as if the acquisition occurred as of the beginning of the periods presented.

The pro forma results include the effects of the amortization of the purchased intangible assets and depreciation expense of acquired rental equipment valuation step up, interest expense on the debt incurred to finance the acquisitions.

A pro forma adjustment has been made to reflect the income taxes that would have been recorded at the combined federal and state statutory rate of 26.5 % on the acquisitions’ combined net income.

The pro forma results for the years ended December 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:

Year Ended December 31,

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

Pro-forma total revenues

Pro-forma net income

Pro-forma basic earnings per share

Pro-forma diluted earnings per share

Vesta Modular

Actual total revenues

Actual net income

Actual basic earnings per share

Actual diluted earnings per share

DISCONTINUED OPERATIONS

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 $ 268.0 million.

The total transaction costs incurred from the divestiture was $ 6.7 million and $ 2.1 million during the years ended December 31, 2023 and 2022, respectively.

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.

The sale price was subject to certain adjustments, including net working capital, certain qualified capital expenditures and certain transaction expenses to be borne by the Company.

In connection with the sale, the Company entered into a number of ancillary agreements, including an escrow agreement associated with net working capital adjustments, a restricted covenant agreement, a transition services agreement, and a number of leases whereby Ironclad or one of its affiliates would be a lessee to certain properties owned by the Company that the Adler Tanks business would continue to utilize after the sale.

These ancillary agreements do not provide for continued involvement by the Company in Adler Tanks.

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 Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021:

(dollar amounts in thousands)

Year Ended December 31,

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

Income from discontinued operations before provision for income taxes

Provision for income taxes from discontinued operations

Income from discontinued operations

The following table presents the carrying value of the divested business' assets and liabilities as presented within assets and liabilities of discontinued operations on the Consolidated Balance Sheets as of December 31, 2022:

(in thousands)

Accounts receivable, net of allowance for credit losses of $ 450

Rental equipment, net

Property, plant and equipment, net

Prepaid expenses and other assets

Intangible assets, net

Total assets of discontinued operations

Accounts payable and accrued liabilities

Deferred income taxes, net

Total liabilities of discontinued operations

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

(in thousands)

Operating activities of discontinued operations:

Depreciation and amortization

Gain on sale of used rental equipment

Investing activities of discontinued operations:

Proceeds from sales of used rental equipment

Purchases of rental equipment

Purchases of property, plant and equipment

The Company leases real estate for certain of its branch offices and rental equipment storage yards, vehicles and equipment used in its rental operations.

1 unchanged sentence

The Company has leases with lease and non-lease components, which are accounted for separately.

Right-Of-Use (“ROU”) assets and liabilities are recognized on the commencement date based on the present value of lease payments over the lease term.

Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred, which are not material.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company uses the interest rate stated in the lease as the discount rate.

If the interest rate is not stated, the Company uses its incremental borrowing rate based on information available on lease commencement date in determining the present value of lease payments.

Many of the Company’s real estate lease agreements include options to extend the lease, which are not included in the minimum lease terms

unless they are reasonably certain to be exercised.

Many of the Company’s real estate lease agreements include options to extend the lease, which are not included in the minimum lease terms unless they are reasonably certain to be exercised.

These leases include one or more options to renew , with renewal terms that may extend the lease term from one to three years .

2 unchanged sentences

The Company recognizes short-term leases on a straight-line basis and does not record a related ROU asset or liability for such leases.

At December 31, 2022 and 2021 the Company’s ROU assets and operating lease liabilities was $ 11.6 m illi on and $ 11.0 million, respectively, which are recorded in Prepaid expenses and other assets and Accounts payable and accrued liabilities on the Company’s Consolidated Balance Sheets.

At December 31, 2023 and 2022 the Company’s ROU assets and operating lease liabilities were $ 14.8 m illi on and $ 11.6 million, respectively, which are recorded in Prepaid expenses and other assets and Accounts payable and accrued liabilities on the Company’s Consolidated Balance Sheets.

During the year ended December 31, 2023, operating lease expense was $ 6.7 million, wh ich includes short term lease expense of $ 0.1 million.

13 unchanged sentences

imputed interest

The Company’s equipment rentals for each of its operating segments are governed by agreements that detail the lease terms and conditions.

The determination of whether these contracts with customers contain a lease generally does not require significant judgement.

4 unchanged sentences

Customers have the option to keep equipment on rent beyond the initial lease term on a month-to month basis based upon their needs.

All of the Company’s rental products have long useful lives relative to the typical rental term with the original investment typically recovered in approximately three to five years .

The rental products are typically rented for a majority of the time owned and a significant portion of the original investment is recovered when sold from inventory.

The Company’s lease agreements do not contain residual value guarantees or restrictive covenants.

As of December 31, 2023, maturities of operating lease payments to be received in 2024 and thereafter were as follows:

1 unchanged sentence

Year Ended December 31,

In the year ended December 31, 2022, the Company’s lease revenues were $ 524.5 million, consisting of $ 520.8 million of operating lease revenues and $ 3.7 million of finance lease revenues.

In the year ended December 31, 2023, the Company’s lease revenues from continuing operations were $ 564.1 million, consisting of $ 561.5 million of operating lease revenues and $ 2.6 million of finance lease revenues.

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

1 unchanged sentence

For the year ended December 31, 2022, the Company’s finance lease revenues included $ 3.3 million of sales revenues and $ 0.4 million of interest income.

The minimum lease payments receivable and the net investment are included in Accounts receivable on the Company’s Consolidated Balance Sheet for such leases, which were as follows:

For the year ended December 31, 2023, the Company’s finance lease revenues included $ 2.2 million of sales revenues and $ 0.4 million of interest income.

The minimum lease payments receivable and the net investment are included in Accounts receivable on the Company’s Consolidated Balance Sheet for such leases, which were as follows:

(in thousands)

1 unchanged sentence

Gross minimum lease payments receivable

Less –

unearned interest

Less – unearned interest

Net investment in finance lease receivables

4 unchanged sentences

REVENUE RECOGNITION

The Company’s accounting for revenues is governed by two accounting standards.

The majority of the Company’s revenues are considered lease or lease related and are accounted for in accordance with Topic 842, Leases.

The Company’s accounting for revenues is governed by two accounting standards.

The majority of the Company’s revenues are considered lease or lease related and are accounted for in accordance with Topic 842, Leases.

Revenues determined to be non-lease related are accounted for in accordance with ASU No.

1 unchanged sentence

The Company accounts for revenues when approval and commitment from both parties have been obtained, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company typically recognizes non-lease related revenues at a point in time because the customer does not simultaneously consume the benefits of the Company’s promised goods and services, or performance obligations, and obtain control when delivery and installation are complete.

For contracts that have multiple performance obligations, the transaction price is allocated to each performance obligation in the contract based on the Company’s best estimate of the standalone selling prices of each distinct performance obligation in the contract.

The standalone selling price is typically determined based upon the expected cost plus an estimated margin of each performance obligation.

Revenue from contracts that satisfy the criteria for over time recognition are recognized as work is performed by using the ratio of costs incurred to estimated total contract costs for each contract.

The majority of revenue for these contracts is derived from long-term projects which typically span multiple quarters .

The timing of revenue recognition, billings, and cash collections results in billed contract receivables and contract assets on the Company's Consolidated Balance Sheets.

In the Company’s contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.

Billings can occur subsequent to revenue recognition, resulting in contract assets, or in advance, resulting in contract liabilities.

These contract assets and liabilities are reported on the Consolidated Balance Sheets 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 Sheets totaled $ 40.7 million and $ 27.4 million at December 31, 2023 and 2022, respectively.

Sales revenues totaling $ 21.4 million were recognized during the year ended December 31, 2023, 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 Sheets and totaled $ 8.7 million and $ 0.6 million at December 31, 2023 and 2022, respectively.

The Company did not recognize any material contract asset impairments during the years ended December 31, 2023 and 2022.

The Company's uncompleted contracts with customers which meet the criteria for over-time revenue recognition have unsatisfied or partially satisfied performance obligations.

As of December 31, 2023, approximately $ 34.3 million of revenue is expected to be recognized for unsatisfied or partially satisfied obligations.

We expect to recognize revenue for approximately one half of these unsatisfied or partially satisfied performance obligations over the next 12 months, with the remaining balance recognized thereafter.

As of December 31, 2023, approximately $ 236.4 million of revenue was recognized for sales and non-lease services transferred at a point in time and approximately $ 31.3 million of revenue was recognized for sales and non-lease services transferred over time.

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

The Company does not typically offer variable payment terms, or accept non-monetary consideration.

Amounts billed and due from the Company’s customers are classified as Accounts receivable on the Company’s consolidated balance sheet.

Amounts billed and due from the Company’s customers are classified as Accounts receivable on the Company’s Consolidated Balance Sheets.

For certain sales of modular buildings, progress payments from the customer are received during the manufacturing of new equipment, or the preparation of used equipment.

The advance payments are not considered a significant financing component because the payments are used to meet working capital needs during the contract and

to protect the Company from the customer failing to adequately complete their obligations under the contract.

These contract liabilities are included in Deferred income on the Company’s consolidated balance sheets and totaled $ 27.4 million and $ 16.8 million at December 31, 2022 and 2021, respectively.

Sales revenues totaling $ 11.5 million were recognized during the year ended December 31, 2022, which were included in the contract liability balance at December 31, 2021.

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

These unbilled contract assets are included in Accounts receivable on the Company’s consolidated balance sheets and totaled $ 0.6 million and $ 1.3 million at December 31, 2022 and 2021, respectively.

The advance payments are not considered a significant financing component because the payments are used to meet working capital needs during the contract and to protect the Company from the customer failing to adequately complete their obligations under the contract.

Lease Revenues

1 unchanged sentence

Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned.

Rental related services revenues are primarily associated with relocatable modular building and liquid and solid containment tanks and boxes leases.

Rental related services revenues are primarily associated with relocatable modular building and portable storage container leases.

1 unchanged sentence

Certain leases are accounted for as sales-type leases.

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.

Other revenues include interest income on sales-type leases and rental income on facility leases.

1 unchanged sentence

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 container and electronic test equipment leases, 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.

Sales contracts that satisfy the criteria for over-time recognition are recognized as work is performed by using the ratio of costs incurred to estimated total contracts costs for each contract.

Accounting for non-lease revenues requires judgment in determining the point in time the customer gains control of the equipment and the appropriate accounting period to recognize revenue.

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 Topic 842) and non-lease revenues (within the scope of Topic 606) and the underlying service provided for the three years ended December 31, 2022, 2021 and 2020:

The following table disaggregates the Company’s revenues from continuing operations by lease (within the scope of Topic 842) and non-lease revenues (within the scope of Topic 606) and the underlying service provided for the three years ended December 31, 2023, 2022 and 2021:

(in thousands)

Portable Storage

Year Ended December 31,

11 unchanged sentences

The Company typically provides limited 90 -day warranties for certain sales of used rental equipment and one-year warranties on equipment manufactured by Enviroplex.

The Company’s incremental cost of obtaining lease contracts, which consists of salesperson commissions, are deferred and amortized over the initial lease term for modular building leases.

Although the Company’s

policy is to provide reserves for warranties when required for specific circumstances, the Company has not found it necessary to establish such reserves to date as warranty costs have not been significant.

The Company’s incremental cost of obtaining lease contracts, which consists of salesperson commissions, are deferred and amortized over the initial lease term for modular building leases.

Incremental costs for obtaining a contract for all other operating segments are expensed in the period incurred because the lease term is typically less than 12 months.

3 unchanged sentences

Unsecured revolving lines of credit

3.84 % Series C senior notes due in 2022

2.35 % Series E senior notes due in 2026

2.57 % Series D senior notes due in 2028

6.25 % Series F senior notes due in 2030

Unamortized debt issuance cost

As of December 31, 2022, the future minimum payments under the unsecured revolving lines of credit, 2.35 % Series E senior notes and 2.57 % Series D senior notes due in 2026 and 2028 , respectively, are as follows:

As of December 31, 2023, the future minimum payments under the unsecured revolving lines of credit, 2.35 % Series E senior notes, 2.57 % Series D senior notes and 6.25 % Series F senior notes due in 2026 , 2028 and 2030 , respectively, are as follows:

(in thousands)

1 unchanged sentence

Unsecured Revolving Lines of Credit

On July 15, 2022, the Company entered into an amended and restated credit agreement with Bank of America, N.A., as Administrative Agent, Swing Line Lender, L/C Issuer and lender, and other lenders named therein (the “Credit Facility”).

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 $ 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, which were repaid on 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 .

In addition, the Company may incur additional senior note indebtedness in an aggregate amount not to exceed $ 250.0 million.

The Credit Facility matures on July 15, 2027 and replaced the Company’s prior $ 420.0 million credit facility dated March 31, 2020 with Bank of America, N.A., as agent, as amended.

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”).

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.

for its cash management services.

The Sweep Service Facility replaced the Company’s prior $12.0 million sweep service facility, dated as of March 30, 2020.

At December 31, 2023, under the Credit Facility and Sweep Service Facility, the Company had unsecured lines of credit that permit it to borrow up to $ 650.0 million of which $ 588.0 million was outstanding.

The Credit Facility 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 Amended Credit Facility):

The Credit Facility 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 Amended Credit Facility):

• 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.

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At December 31, 2023, the actual ratio was 2.35 to 1.

Amounts borrowed under the Credit Facility bear interest at the Company’s option at either:

(i) SOFR plus a defined margin, or (ii) the Agent bank’s prime rate (“base rate”) plus a margin.

Amounts borrowed under the Credit Facility bear interest at the Company’s option at either:

(i) SOFR plus a defined margin, or (ii) the Agent bank’s prime rate (“base rate”) plus a margin.

The applicable margin for each type of loan is measured based upon the Consolidated Leverage Ratio at the end of the prior fiscal quarter and ranges from 1.00 % to 1.75 % for SOFR loans and 0 % to 0.75 % for base rate loans.

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base rate plus an applicable margin and an unused commitment fee for the portion of the $ 20.0 million facility not used.

The applicable base rate

margin and unused commitment fee rates for the Sweep Service Facility are the same as for the Amended Credit Facility.

The applicable base rate margin and unused commitment fee rates for the Sweep Service Facility are the same as for the Amended Credit Facility.

The following information relates to the lines of credit for each of the following periods:

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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 B Senior Notes and Series C 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’

agreement to purchase the Shelf Notes.

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, Series E Senior Notes and Series F Senior Notes, each defined below) then outstanding, to be dated the date of issuance thereof, to mature, in case of each Shelf Note so issued, no more than 15 years after the date of original issuance thereof, to have an average life, in the case of each Shelf Note so issued, of no more than 15 years after the date of original issuance thereof, to bear interest on the unpaid balance thereof from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Shelf Note so issued, in accordance with the Note Purchase Agreement.

The Company will sell the Shelf Notes directly to such purchasers.

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6.25% Senior Notes Due in 2030

On March 17, 2021, the Company issued and sold to the purchasers $ 40 million aggregate principal amount of 2.57 % Series D Notes (the “Series D Senior Notes”) pursuant to the terms of the Amended and Restated Note Purchase and Private Shelf Agreement, dated March 31, 2020 (the “Note Purchase Agreement”), among the Company, PGIM, Inc.

On September 27, 2023, the Company issued and sold to the purchasers $ 75.0 million aggregate principal amount of 6.25 % Series F Notes (the “Series F Senior Notes”) pursuant to the terms of the Second Amended and Restated Note Purchase and Private Shelf Agreement, dated June 8, 2023 (the “Note Purchase Agreement”), among the Company, PGIM, Inc.

and the noteholders party thereto.

The Series F Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 6.25 % per annum and mature on September 27, 2030 .

Interest on the Series F Senior Notes is payable semi-annually beginning on March 27, 2024 and continuing thereafter on September 27 and March 27 of each year until maturity.

The principal balance is due when the notes mature on September 27, 2030.

The full net proceeds from the Series F Senior Notes will primarily be used to fulfill the income tax obligations incurred from the divestiture of Adler Tanks.

At December 31, 2023, the principal balance outstanding under the Series F Senior Notes was $ 75.0 million.

2.57% Senior Notes Due in 2028

and the noteholders party thereto.

The Series D Senior Notes are an unsecured obligation of the Company and bear interest at a rate of 2.57 % per annum and mature on March 17, 2028 .

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The principal balance is due when the notes mature on March 17, 2028.

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

2.35% Senior Notes Due in 2026

On June 16, 2021, the Company issued and sold to the purchasers $ 60 million aggregate principal amount of 2.35 % Series E Notes (the "Series E Notes") pursuant to the terms of the Amended and Restated Note Purchase and Private Shelf Agreement, dated March 31, 2020 (the “Note Purchase Agreement”), among the Company, PGIM, Inc.

and the noteholders party thereto.

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The principal balance is due when the notes mature on June 16, 2026.

The full net proceeds from the Series E Senior Notes were used to pay down the Company’s credit facility.

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

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

There are no anticipated trends that the Company is aware of that would indicate non-compliance with these covenants, though, significant deterioration in the Company’s financial performance could impact its ability to comply with these covenants.

Income before provision (benefit) for income taxes consisted of the following:

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The reconciliation of the U.S.

federal statutory tax rate to the Company’s effective tax rate is as follows:

Year Ended December 31,

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State deferred tax apportionment change, net of federal benefit

Valuation allowance

Non-deductible transaction costs

Non-deductible executive compensation

Share-based compensation

Enactment of the Tax Cuts and Jobs Act

The following table shows the deferred income taxes related to the temporary differences between the tax bases of assets and liabilities and the respective amounts included in “Deferred income taxes, net”

on the Company’s Consolidated Balance Sheets:

(in thousands)

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Allowance for doubtful accounts

Net operating loss carry-forward

Deferred revenues

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Deferred income taxes, net

The net deferred income tax liability presented in the table above for the period ended December 31, 2022, included a net deferred tax liability of $ 43.6 million related to the divested Adler Tanks segment and is included in Liabilities of discontinued operations on the Consolidated Balance Sheets.

As of December 31, 2023, the current and deferred tax liabilities from discontinued operations of $ 64.8 million were paid in full and no future tax obligations pertaining to the Adler Tanks segment remain.

The Company's tax loss carryforwards for the year ended December 31, 2023, were $ 129.2 million and $ 32.2 million for federal and state jurisdictions, respectively, which are expected to result in a future federal and state tax benefit of $ 27.1 million and $ 1.5 million, respectively.

The availability of these tax losses to offset future income varies by jurisdiction.

Furthermore, the ability to utilize the tax losses may be subject to additional limitations.

The company’s federal net operating loss carryforwards have an indefinite carryforward period.

The company’s state net operating loss carryforwards have differing carryforward periods.

The Company anticipates that the available net operating losses as of December 31, 2023, will be utilized prior to their respective expiration dates.

In December 2016, the Company decided to exit the Bangalore, India branch operations of its TRS-RenTelco electronics division.

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As a result, a valuation allowance was recorded against the deferred tax assets that resulted primarily from accumulated net operating loss carry forwards in India that management estimated the benefit of which will not be realized.

As of December 31, 2022, the Company’s foreign net operating losses for tax purposes were $ 0.6 million.

If not realized, these carry forwards will begin to expire in 2023 .

As of December 31, 2023, the Company’s foreign net operating losses for tax purposes were $ 0.6 million.

If not realized, these carry forwards will expire in 2024 .

For income tax purposes, deductible compensation related to share-based awards is based on the value of the award when realized, which may be different than the compensation expense recognized by the company for financial statement purposes which is based on the award value on the date of grant.

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BENEFIT PLANS

The Company adopted the 2016 Stock Incentive Plan (the “2016 Plan”), effective June 8, 2016, under which 2,000,000 shares of the common stock of the Company, plus the number of shares that remain available for grants of awards under the Company's 2007 Stock Option Plan (the “2007 Plan”) become available as a result of forfeiture, termination, or expiration of awards previously granted under the 2007 Plan, were reserved for the grant of equity awards to its employees, directors and consultants.

The equity awards have

a maximum term of 7 years at an exercise price of not less than 100 % of the fair market value of the Company's common stock on the date the equity award is granted.

The equity awards have a maximum term of 7 years at an exercise price of not less than 100 % of the fair market value of the Company's common stock on the date the equity award is granted.

The 2016 Plan replaced the 2007 Plan.

The 2016 Plan provides for the grant of awards in the form of stock options, stock appreciation rights, restricted stock units (“RSUs”), the vesting of which may be performance-based or service-based, and other rights and benefits.

Each RSU issued reduces the number of shares of the Company’s common stock available for grant under the 2016 Plan by two shares.

There were no significant modifications to the 2016 Plan or awards classified as liabilities in the year ended December 31, 2023.

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As of December 31, 2023, a cumulative total of 8,458,600 shares subject to options have been granted with exercise prices ranging from $ 3.47 to $ 40.37 .

Of these, options have been exercised for the purchase of 6,767,253 shares, while options for 1,672,732 shares have been terminated, and options for 139,350 shares with exercise prices ranging from $ 24.60 to $ 40.37 remained outstanding under the stock plans.

Of these, options have been exercised for the purchase of 6,906,363 shares, while options for 1,672,732 shares have been terminated, and options for 240 shares with an exercise price of $ 34.57 remained outstanding under the stock plans.

These options vest over five years and expire seven years after grant.

To date, no options have been issued to any of the Company’s non-employee advisors.

As of December 31, 2023, 1,123,946 shares remained available for issuance of awards under the stock plans.

A summary of the Company’s option activity and related information for the three years ended December 31, 2022 is as follows:

A summary of the Company’s option activity and related information for the three years ended December 31, 2023 is as follows:

(in millions)

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Expected to vest after December 31, 2023

The intrinsic value of stock options at any point in time is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock.

The aggregate intrinsic value of options exercised and sold under the Company’s stock option plans was $ 7.9 million, $ 7.0 million and $ 5.9 million for the years ended December 31, 2022, 2021 and 2020, respectively, determined as of the date of option exercise.

As of December 31, 2022, there was no unrecognized compensation cost related to unvested share-based compensation option arrangements granted under the Company’s stock plans.

The intrinsic value of stock options at any point in time is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock.

The aggregate intrinsic value of options exercised and sold under the Company’s stock option plans was $ 9.4 million, $ 7.9 million and $ 7.0 million for the years ended December 31, 2023, 2022 and 2021, respectively, determined as of the date of option exercise.

As of December 31, 2023, there was no unrecognized compensation cost related to unvested share-based compensation option arrangements granted under the Company’s stock plans.

The following table indicates the options outstanding and options exercisable by exercise price with the weighted-average remaining contractual life for the options outstanding and the weighted-average exercise price at December 31, 2023:

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Weighted-average grant date value

$ 20 –

$ 25 –

$ 30 –

$ 35 –

$ 40 –

$ 20 –

The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of share-based compensation at the date of grant, which requires the use of accounting judgment and financial estimates, including estimates of the expected term option holders will retain their vested stock options before exercising them, the estimated volatility of the Company’s stock price over the expected term and the expected number of options that will be forfeited prior to the completion of their vesting requirements.

Application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation amounts recognized in the Consolidated Statements of Income.

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Restricted Stock Units

The following table summarizes the activity of the Company’s RSUs, which includes service-based and performance-based awards, for the three years ended December 31, 2022:

The following table summarizes the activity of the Company’s RSUs, which includes service-based and performance-based awards, for the three years ended December 31, 2023:

(in millions)

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There were 88,110 performance-based RSUs expected to vest as of December 31, 2023.

Service based RSUs issued to the Company’s directors generally vest over twelve to fourteen months .

Service based RSUs issued to the Company’s management vest over three years.

Service based RSUs issued to the Company’s directors generally vest over twelve to fourteen months .

Service based RSUs issued to the Company’s management vest over three years.

There were 83,567 service-based RSUs expected to vest as of December 31, 2023.

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Employee Stock Ownership and 401(k) Plans

The McGrath RentCorp Employee Stock Ownership and 401(k) Plan (the “KSOP”) provides that each participant may annually contribute an elected percentage of his or her salary, not to exceed the statutory limit.

Each employee who has at least two months of service with the Company and is 21 years or older, is eligible to participate in the KSOP.

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Contributions are expensed in the year approved by the Board of Directors.

Dividends on the Company’s stock held by the KSOP are treated as ordinary dividends and, in accordance with existing tax laws, are deducted by the Company in the year paid.

For the year ended December 31, 2023 dividends deducted by the Company were $ 0.5 million, which resulted in a tax benefit of approximately $ 0.1 million in 2023.

At December 31, 2022, the KSOP held 258,758 shares, or 1 % of the Company’s total common shares outstanding.

At December 31, 2023, the KSOP held 249,468 shares, or 1 % of the Company’s total common shares outstanding.

These shares are included in basic and diluted earnings per share calculations.

SHAREHOLDERS’

SHAREHOLDERS’ EQUITY

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.

In August 2015, the Company’s Board of Directors authorized the Company to repurchase 2,000,000 shares of the Company's outstanding common stock (the “Repurchase Plan”).

The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management’s discretion.

In August 2015, the Company’s Board of Directors authorized the Company to repurchase 2,000,000 shares of the Company's outstanding common stock (the “Repurchase Plan”).

The amount and time of the specific repurchases are subject to prevailing market conditions, applicable legal requirements and other factors, including management’s discretion.

All shares repurchased by the Company are canceled and returned to the status of authorized but unissued shares of common stock.

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The Company maintains insurance coverage for its operations and employees with appropriate aggregate, per occurrence and deductible limits as the Company reasonably determines necessary or prudent with current operations and historical experience.

The major policies include coverage for property, general liability, auto, directors and officers, health, and workers’

compensation insurances.

The major policies include coverage for property, general liability, auto, directors and officers, health, and workers’ compensation insurances.

The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred and the amount can be reasonably estimated.

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The Company reviews these provisions at least quarterly and adjusts these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.

Litigation is inherently unpredictable and is subject to significant uncertainties, some of which are beyond the Company’s control.

In the opinion of management, there was not at least a reasonable possibility that the ultimate amount of liability not covered by insurance, if any, under any pending litigation and claims, individually or in the aggregate, will have a material adverse effect on the financial position or operating results of the Company.

The Company’s health plans are self-funded high deductible plans with annual stop-loss insurance of $ 200,000 per claim.

Beginning in 2019, the Company’s workers compensation insurance is underwritten by an insurance company with no stop-loss value and $ 350,000 for prior claim years.

Insurance providers are responsible for making claim payments that exceed these amounts on an individual claim basis.

In addition, the Company has stop loss insurance that pays for claim payments made during a twelve month

coverage period that exceeds certain specified thresholds in the aggregate.

The Company’s health plans are self-funded high deductible plans with annual stop-loss insurance of $ 200,000 per claim.

Beginning in 2019, the Company’s workers compensation insurance is underwritten by an insurance company with no stop-loss value and $ 350,000 for prior claim years.

Insurance providers are responsible for making claim payments that exceed these amounts on an

individual claim basis.

In addition, the Company has stop loss insurance that pays for claim payments made during a twelve month coverage period that exceeds certain specified thresholds in the aggregate.

The Company records an expense when health and workers compensation claim payments are made and accrues for the portion of claims incurred, but not yet paid at period end.

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A high degree of judgment is required in developing the underlying assumptions and the resulting amounts to be accrued.

In addition, our assumptions will change as the Company’s loss experience develops.

All of these factors have the potential for impacting the amounts previously accrued and the Company may be required to increase or decrease the amounts previously accrued.

At December 31, 2022 and 2021, accruals for the Company’s health and workers’

compensation high deductible plans were $ 2.0 million and $ 2.5 million, respectively.

INTANGIBLE ASSETS

Intangible assets consist of the following:

In addition, our assumptions will change as the Company’s loss experience develops.

All of these factors have the potential to impact the amounts previously accrued and the Company may be required to increase or decrease the amounts previously accrued.

At December 31, 2023 and 2022, accruals for the Company’s health and workers’ compensation high deductible plans were $ 1.6 million and $ 2.0 million, respectively.

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill were as follows:

(dollar amounts in thousands)

Mobile Modular

Adler Tanks (Discontinued)

Balance at December 31, 2021

Changes to Design Space purchase accounting

Balance at December 31, 2022

Goodwill acquired through business combination

Derecognition of goodwill divested

Balance at December 31, 2023

Intangible assets from continuing operations consist of the following:

(dollar amounts in thousands)

Average remaining life in years

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Non-compete agreements

Customer backlog

Total amortizing

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Trade name - non-amortizing

The Company also assesses potential impairment of its goodwill and intangible assets with indefinite lives on an annual basis regardless of whether there is evidence of impairment.

If indicators of impairment were to be present in intangible assets used in operations and future discounted cash flows were not expected to be sufficient to recover the asset’s carrying amount, an impairment loss would be charged to expense in the period identified.

The amount of an impairment loss that would be recognized is the excess of the asset’s carrying value over its fair value.

The Company last conducted a qualitative analysis of its goodwill and intangible assets in the fourth quarter 2023, with no indicators of impairment.

In addition, no impairment triggering events occurred during the year ended December 31, 2023.

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

Company bases its fair value estimates on assumptions that it believes are reasonable but are uncertain and subject to changes in market conditions.

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

Amortization expense in the years ended December 31, 2023, 2022 and 2021 was $ 10.7 million, $ 5.9 million and $ 5.9 million, respectively.

Based on the carrying values at December 31, 2022 and assuming no subsequent impairment of the underlying assets, the annual amortization is expected to be $ 5.9 million in 2023 through 2025, $ 5.4 million in 2026 and $ 5.2 million in 2027.

Based on the carrying values at December 31, 2023 and assuming no subsequent impairment of the underlying assets, the annual amortization is expected to be $ 10.3 million in 2024, $ 10.2 million in 2025, $ 9.8 million in 2026, $ 9.6 million in 2027 and $ 8.2 million in 2028.

For information on intangible assets from discontinued operations refer to Note 5.

RELATED PARTY TRANSACTIONS

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SEGMENT REPORTING

FASB guidelines establish annual and interim reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers.

In accordance with these guidelines the Company’s four reportable segments are Mobile Modular, TRS-RenTelco, Adler Tanks and Enviroplex.

Management focuses on several key measures to evaluate and assess each segment’s performance including rental revenue growth, gross margin, Adjusted EBITDA and income before provision for income taxes.

Excluding interest expense, allocations of revenue and expense not directly associated with one of these segments are generally allocated to Mobile Modular, TRS-RenTelco and Adler Tanks, based on their pro-rata share of direct revenues.

Interest expense is allocated amongst Mobile Modular, TRS-RenTelco and Adler Tanks based on their pro-rata share of average rental equipment at cost, goodwill, intangible assets, accounts receivable, deferred income and customer security deposits.

During the quarter ended December 31, 2023, the Company determined that its Portable Storage business segment met the criteria for separate recognition as defined in the Accounting Standards Codification ("ASC") Topic 280, Segment Reporting .

The guidance under this topic requires a public business entity to evaluate both quantitative and qualitative thresholds to determine the significance of a business segment and whether the separate reporting of a business segment enhances the users understanding of the reporting entity's performance, future net cash flows and judgments.

The Company evaluated the guidance within Topic 280 and made its determination to separately report the Portable Storage segment primarily due to the Company's continued growth in container fleet purchases and related increased revenues and improved profitability performance when compared to previously reported periods.

FASB guidelines establish annual and interim reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers.

In accordance with these guidelines the Company’s four reportable segments are Mobile Modular, Portable Storage, TRS-RenTelco and Enviroplex.

Management focuses on several key measures to evaluate and assess each segment’s performance including rental revenue growth, gross margin and income before provision for income taxes.

Excluding interest expense, allocations of revenue and expense not directly associated with one of these segments are generally allocated to Mobile Modular, Portable Storage and TRS-RenTelco, based on their pro-rata share of direct revenues.

Interest expense is allocated amongst Mobile Modular, Portable Storage and TRS-RenTelco based on their pro-rata share of average rental equipment at cost, goodwill, intangible assets, accounts receivable, deferred income and customer security deposits.

The Company does not report total assets by business segment.

Summarized financial information for the years ended December 31, 2022, 2021 and 2020, for the Company’s reportable segments is shown in the following tables:

Summarized financial information from continuing operations for the years ended December 31, 2023, 2022 and 2021, for the Company’s reportable segments is shown in the following tables:

(dollar amounts in thousands)

Portable Storage

Year Ended December 31,

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Income before provision for income taxes

Adjusted EBITDA 3

Rental equipment acquisitions

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(dollar amounts in thousands)

Portable Storage

Year Ended December 31,

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Selling and administrative expenses

Income from operations

Income (loss) from operations

Interest expense (income) allocation

Income before provision for income taxes

Adjusted EBITDA 3

Rental equipment acquisitions

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Income before benefit for income taxes

Adjusted EBITDA 3

Rental equipment acquisitions

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Gross Enviroplex sales revenues were $ 22,615 , $ 24,162 and $ 32,095 in 2022, 2021 and 2020, respectively.

There were $ 992 and $ 1,014 inter-segment sales to Mobile Modular in 2022 and 2021, which have been eliminated in consolidation.

There were no inter-segment sales in 2019.

There were $ 2,422 , $ 992 and $ 969 inter-segment sales to Mobile Modular in 2023, 2022 and 2021, respectively, which have been eliminated in consolidation.

Utilization is calculated 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.

The average utilization for the period is calculated using the average costs of rental equipment.

During the year ended December 31, 2022, the calculation for Adjusted EBITDA was adjusted to include one-time transaction costs attributed to acquisition, divestiture and integration related activities.

For comparability, the transaction costs incurred during 2021 were included in the Adjusted EBITDA calculation for the year ended December 31, 2021.

During the years ended December 31, 2022 and 2021, there were $ 4.3 million and $ 2.0 million of transaction costs, respectively, included in the Adjusted EBITDA calculation.

There were no transaction costs included in the calculation for the year ended December 31, 2020.

Additional information on Adjusted EBITDA can be found on page 46.

No single customer accounted for more than 10% of total revenues during 2023, 2022 and 2021.

Revenue from foreign country customers for the same periods accounted for 4 % of the Company’s total revenues.

On May 17, 2021, the Company completed the purchase of substantially all of the assets of Design Space Modular Buildings PNW, LP (“Design Space”) for $ 267.3 million in cash consideration on the closing date.

Design Space provides modular buildings and portable storage containers rental and sale solutions to customers in the West and Pacific Northwest states in the U.S.

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 excess of the purchase price over those fair values is recorded as goodwill.

The financial results of Design Space were a part of the Mobile Modular segment since May 17, 2021, including $ 1.7 million of transaction costs.

On April 1, 2021 the Company completed the purchase of assets of GRS Holding LLC, DBA Kitchens To Go (“Kitchens To Go”) for $ 18.3 million in cash consideration.

Kitchens To Go provides interim and permanent modular kitchen solutions for foodservice providers that require flexible facilities to continue or expand operations.

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

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

The financial results of Kitchens To Go were a part of the Mobile Modular segment since April 1, 2021, including $ 0.3 million of transaction costs.

The following tables summarize the purchase price allocations reflecting estimated fair values of assets acquired and liabilities assumed in the Design Space and Kitchens To Go acquisitions, with excess amounts allocated to goodwill.

The valuation of intangible assets acquired is based on certain valuation assumptions including cash flow projections, discount rates, contributory asset charges and other valuation model inputs.

The valuation of tangible long-lived assets acquired is dependent upon various analyses including an analysis of the condition and estimated remaining economic lives of the assets acquired.

Design Space:

(dollar amounts in thousands)

Rental equipment

Intangible assets:

Customer relationships

Customer backlog

Accounts receivable

Property, plant and equipment

Prepaid expenses and other assets

Accounts payable and accrued liabilities

Deferred income

Total purchase price

Kitchens To Go:

(dollar amounts in thousands)

Rental equipment

Intangible assets:

Customer relationships

Customer backlog

Accounts receivable

Property, plant and equipment

Prepaid expenses and other assets

Accounts payable and accrued liabilities

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 $ 104,196 reflects the strategic fit of Design Space and Kitchens to Go with the Company’s modular business operations.

The Company amortizes the acquired customer relationships, tradename and non-compete over their expected useful lives of 8 years, 8 years and 5 years, respectively.

As of the twelve months ended December 31, 2022, the customer backlog has been amortized in full.

Goodwill is expected to have an indefinite life and will be subject to future impairment testing.

The goodwill is deductible for tax purposes over 15 years.

The following unaudited pro forma financial information shows the combined results of operations of the Company, Design Space and Kitchens To Go as if the acquisitions occurred as of the beginning of the periods presented.

The pro forma results include

the effects of the amortization of the purchased intangible assets and depreciation expense of acquired rental equipment valuation step up, interest expense on the debt incurred to finance the acquisitions.

A pro forma adjustment has been made to reflect the income taxes that would have been recorded at the combined federal and state statutory rate of 28 % on the acquisitions’

combined net income.

The pro forma results for the year ended December 31, 2021 have been adjusted to include transaction related costs.

Year Ended December 31,

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

Pro-forma total revenues

Pro-forma net income

Pro-forma basic earnings per share

Pro-forma diluted earnings per share

Design Space and Kitchens To Go

Actual total revenues

Actual net income

Actual basic earnings per share

Actual diluted earnings per share

On December 31, 2021 the Company completed the purchase of the assets of Titan Storage Containers, LLC (“Titan”) for $ 6.9 million in cash consideration.

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

in accordance with criteria in ASC 805 and the assessment of the fair value of the purchased assets was allocated primarily to rental equipment totaling $ 6.2 million and rolling stock assets totaling $ 0.8 million, partially offset by accrued liabilities of $ 0.2 million.

The rolling stock assets included delivery trucks, delivery trailers, trucks and forklifts.

Supplemental pro forma prior year information has not been provided as the historical financial results of Titan were not significant.

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

SUBSEQUENT EVENTS

On February 1, 2022, 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 $ 265 million.

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.

The sale price was subject to certain adjustments, including net working capital, certain qualified capital expenditures and certain transaction expenses to be borne by the Company.

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 discontinued operations and held-for-sale, respectively, were not met during the fourth quarter of 2022.

On February 1, 2022, the Company completed the acquisition of Vesta Housing Solutions Holdings, Inc.

(“Vesta Modular”), a portfolio company of Kinderhook Industries, for a purchase price of $ 400 million.

The purchase price was subject to certain adjustments, including net working capital, certain qualified capital expenditures and certain transaction expenses to be borne by the seller of Vesta Modular.

Vesta Modular is a leading provider of temporary and permanent modular space solutions serving customers between its modular leasing and modular construction divisions.

The acquisition is expected to strengthen the Company's core modular portfolio and accelerate growth through increases in geographic coverage and density.

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.

Revenue from foreign country customers accounted for 3 % of the Company’s total revenues for 2023 and 4 % for years 2022 and 2021.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 8. Financial Statements and Supplementary Data