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A Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.
−Removed: RISKS RELATED TO THE PROPOSED ACQUISITION BY WILLSCOT MOBILE MINI:
−Removed: There are material uncertainties and risks associated with the proposed Transaction, including the timing of the consummation of the Transaction, which may adversely affect our business and ongoing operations, financial condition and results of operations, employees, customers, shareholders, other parties and business prospects, and a failure to complete the Transaction on the terms reflected in the Merger Agreement, if at all, could have a material and adverse effect on our business, financial condition, results of operations, cash flows and stock price.
−Removed: • The announcement and pendency of the proposed Transaction may adversely affect our business, financial condition and results of operations.
−Removed: • On January 28, 2024, we entered into the Merger Agreement with WillScot Mobile Mini.
−Removed: Uncertainty about the effect of the proposed Transaction on our employees, customers, shareholders and other parties may have an adverse effect on our business, financial condition and results of operation regardless of whether the proposed Transaction is completed.
−Removed: The risks to our business include the following, all of which could be exacerbated by a delay in the completion of the proposed Transaction:
−Removed: • the impairment of our ability to attract, retain, and motivate our employees, including key personnel;
−Removed: • the diversion of significant management time and resources towards the completion of the proposed Transaction;
−Removed: • difficulties maintaining relationships with customers, suppliers, and other business partners;
−Removed: • delays or deferments of certain business decisions by our customers, suppliers, and other business partners;
−Removed: • the inability to pursue alternative business opportunities or make appropriate changes to our business because the Merger Agreement requires us to use reasonable best efforts to conduct our business in the ordinary course of business and not engage in certain kinds of transactions prior to the completion of the proposed Transaction;
−Removed: • litigation relating to the proposed Transaction and the costs related thereto;
−Removed: • the incurrence of significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed Transaction.
−Removed: Additionally, in approving the Merger Agreement, our Board of Directors considered a number of factors and potential benefits, including the fact that the Transaction consideration to be received by holders of our common stock represented an approximate 10% premium over the Company’s closing stock price of $111.75 on January 26, 2024, the last full trading day prior to the announcement of the proposed Transaction.
−Removed: If the Transaction is not completed, neither we nor the holders of our common stock may realize this benefit of the Transaction.
−Removed: Failure to consummate the proposed Transaction within the expected timeframe or at all could have a material adverse impact on our business, financial condition and results of operations, as well as the trading prices of our common stock.
−Removed: There can be no assurance that the proposed Transaction will be consummated.
−Removed: The consummation of the proposed Transaction is subject to certain regulatory approvals and customary closing conditions.
−Removed: The obligation of each party to consummate the Transaction is also conditioned upon the other party’s representations and warranties being true and correct to the extent specified in the Merger Agreement and the other party having performed in all material respects its obligations under the Merger Agreement.
−Removed: There can be no assurance that these and other conditions to closing will be satisfied in a timely manner or at all.
−Removed: The Merger Agreement also includes customary termination provisions for both the Company and WillScot Mobile Mini.
−Removed: If we are required to make a termination payment, doing so may materially adversely affect our business, financial condition and results of operations.
−Removed: In addition, McGrath could be subject to litigation related to any failure to complete the Transaction or related to any proceeding to specifically enforce McGrath’s obligation to perform McGrath’s obligations under the Merger Agreement.
−Removed: There can be no assurance that a remedy will be available to us in the event of a breach of the Merger Agreement by WillScot Mobile Mini or its affiliates or that we will wholly or partially recover for any damages incurred by us in connection with the proposed Transaction.
−Removed: A failed transaction may result in negative publicity and a negative impression of us among our customers or in the investment community or business community generally.
−Removed: Furthermore, any disruptions to our business resulting from the announcement and pendency of the proposed Transaction, including any adverse changes in our relationships with our customers, partners, suppliers and employees, could continue or accelerate in the event of a failed transaction.
−Removed: In addition, if the proposed Transaction is not completed, and there are no other parties willing and able to acquire the Company at a price of $123.00 per share or higher, on terms acceptable to us, the share price of our common stock will likely decline to the extent that the current market price of our common stock reflects an assumption that the proposed Transaction will be completed.
−Removed: Also, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Transaction, for which we will have received little or no benefit if the proposed Transaction is not completed.
−Removed: Many of these fees and costs will be payable by us even if the proposed Transaction is not completed and may relate to activities that we would not have undertaken other than to complete the proposed Transaction.
−Removed: The Transaction is subject to the expiration or termination of applicable waiting periods and the DOJ or FTC may impose conditions that could have an adverse effect on WillScot Mobile Mini, McGrath or the combined company or, if not obtained, could prevent completion of the Transaction.
−Removed: Before the Transaction may be completed, any applicable waiting periods (and any extensions thereof) under the HSR Act relating to the completion of the Transaction must have expired or been terminated.
−Removed: Under the Merger Agreement, WillScot Mobile Mini and McGrath have agreed to use their respective reasonable best efforts to obtain all consents required to be obtained from any governmental authority that are necessary, proper or advisable to consummate the Transaction.
−Removed: On February 21, 2024, each of McGrath and WillScot Mobile Mini received a second request from the FTC in connection with the FTC’s review of the Transaction, which extends the waiting period until 30 days after both parties have substantially complied with the second request, unless the FTC early terminates the additional waiting period or the parties otherwise agree not to consummate the Transaction for a period of time after substantial compliance.
−Removed: On July 24, 2024, the parties committed to the FTC that they would not close the Transaction prior to September 27, 2024.
−Removed: However, the timeline is not binding on the FTC, which has the option to take alternative actions, including initiating legal proceedings against the parties in relation to the Transaction.
−Removed: McGrath and WillScot Mobile Mini are working with the FTC to complete its investigation as soon as practicable.
−Removed: In addition, McGrath has received civil investigative demands from three state attorneys general inquiring into the transaction.
−Removed: Similarly, McGrath and WillScot Mobile Mini are working with those states to complete their investigations as soon as practicable.
−Removed: However, neither WillScot Mobile Mini nor McGrath is required to agree to or commit to any actions that individually or in the aggregate would, or would reasonably be expected to have, a material adverse effect on WillScot Mobile Mini and its subsidiaries when taken as a whole, or McGrath and its subsidiaries when taken as a whole.
−Removed: In addition, at any time before or after the completion of the Transaction, and notwithstanding the expiration or termination of applicable waiting periods, the DOJ or FTC or any state attorney general could take such action under the antitrust laws as such party deems necessary or desirable in the public interest.
−Removed: Such action could include, among
−Removed: other things, seeking to enjoin the completion of the Transaction, to rescind the Transaction or to conditionally permit the completion of the Transaction subject to regulatory conditions or other remedies.
−Removed: In addition, in some circumstances, a third party could initiate a private action challenging, seeking to enjoin, or seeking to impose conditions on the Transaction.
−Removed: WillScot Mobile Mini and McGrath may not prevail and may incur significant costs in defending or settling any such action.
−Removed: There can be no assurance that the conditions to the completion of the Transaction set forth in the Merger Agreement relating to applicable antitrust laws will be satisfied.
−Removed: • Prior to the completion of the Transaction or the termination of the Merger Agreement in accordance with its terms, we are prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to us and our shareholders.
−Removed: After the date of the Merger Agreement and prior to the Effective Time, the Merger Agreement restricts us from taking specified actions without the consent of WillScot Mobile Mini (which consent may not be unreasonably withheld, conditioned or delayed) and requires that our business be conducted in all material respects in the ordinary course of business.
−Removed: These restrictions may prevent us from making appropriate changes to our businesses or organizational structures or from pursuing attractive business opportunities that may arise prior to the completion of the Transaction and could have the effect of delaying or preventing other strategic transactions.
−Removed: Adverse effects arising from the pendency of the Transaction could be exacerbated by any delays in consummation of the Transaction or termination of the Merger Agreement.
−Removed: • The Transaction, including uncertainty regarding the Transaction, may cause customers, suppliers, distributors or strategic partners to delay or defer decisions, which could negatively affect our business and adversely affect our ability to effectively manage our business.
−Removed: The Transaction will be consummated only if certain conditions are met.
−Removed: Many of the conditions are outside of our control, and both we and WillScot Mobile Mini also have the right to terminate the Merger Agreement in certain circumstances.
−Removed: Accordingly, there may be uncertainty regarding the completion of the Transaction.
−Removed: This uncertainty may cause customers, suppliers, distributors, strategic partners or others that deal with us to delay or defer entering into contracts with us or making other decisions concerning us or seek to change or cancel existing business relationships, which could negatively affect our business.
−Removed: Any delay or deferral of those decisions or changes in existing agreements could have a material adverse effect on our business, regardless of whether the Transaction is ultimately completed.
−Removed: • The Transaction may cause difficulty in attracting, motivating and retaining employees.
−Removed: Our current and prospective employees may experience uncertainty about their future role with the Company until strategies with regard to these employees are announced or executed, which may impair our ability to attract, retain and motivate key management, operational and customer-facing employees and other personnel prior to the Transaction.
−Removed: If we are unable to retain and replace personnel, we could face disruptions in our operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment and training costs.
−Removed: • Stockholder litigation could result in substantial costs and may delay or prevent the Transaction from being completed.
−Removed: In connection with the announcement of the Transaction, as is common in the context of mergers and acquisitions of publicly-traded companies, we (along with our directors and officers) may attract lawsuits seeking to enjoin us from proceeding with or consummating the Transaction, or seeking to have the Transaction rescinded after its consummation.
−Removed: We may also receive demands from shareholders seeking more information or other board action.
−Removed: Defending against such claims, even those without merit, could result in substantial costs and divert management’s time and resources, which may negatively impact our financial condition and adversely affect our business and results of operations.
−Removed: Such claims could prevent or delay the consummation of the Transaction, including through an injunction, and result in additional costs to us.
−Removed: The ultimate resolution of any such lawsuit cannot be predicted, and an adverse ruling in any such lawsuit may cause the Transaction to be delayed or not to be completed, which could cause us not to realize some or all of the anticipated benefits of the Transaction.
−Removed: For a discussion of the lawsuits that are currently pending, see Part II, Item 1, "Legal Proceedings" of this Form 10-Q, which is hereby incorporated by reference.
RISKS RELATED TO OUR STRATEGY AND OPERATION:
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• the budgetary constraints of our customers;
+Added: • loss of customers and prospective customers during the pendency of the now terminated merger with WillScot Mobile Mini
• seasonality of our rental businesses and our end-markets;
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The market price of our common stock fluctuates on the NASDAQ Global Select Market and is likely to be affected by a number of factors including but not limited to:
−Removed: • uncertainty regarding the timing of the consummation of the proposed Transaction or failure to consummate the Transaction;
−Removed: • the price per share of WillScot Mobile Mini Common Stock;
+Added: • impact of the termination of the Merger Agreement on the Company and the industrial sector generally;
• our operating performance and the performance of our competitors, and in particular any variations in our operating results or dividend rate from our stated guidance or from investors’ expectations;
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We need to attract and retain highly qualified personnel to replace personnel when turnover occurs, as well as add to our staff levels as growth occurs.
+Added: The pendency of the now terminated merger with WillScot Mobile Mini had a negative impact on the recruitment and retention of our personnel.
Our business and stock price likely will suffer if we are unable to fill, or experience delays in filling open positions, or fail to retain key personnel.
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Significant and increasing investments of time and resources by management and Board have been, and will continue to be, required to anticipate and address cybersecurity risks and incidents.
−Removed: However, given that the techniques used to obtain unauthorized access or to sabotage systems change
−Removed: frequently, and often are not identified until they are launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures in time to stop a cyber incident.
+Added: However, given that the techniques used to obtain unauthorized access or to sabotage systems change frequently, and often are not identified until they are launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures in time to stop a cyber incident.
Thus, there can be no assurance that our efforts to protect our data and information technology systems will prevent future breaches in our systems (or that of our third-party providers).
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If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.
−Removed: At June 30, 2024, we had $382.7 million of goodwill and intangible assets, net, on our Consolidated Balance Sheets.
+Added: At September 30, 2024, we had $380.1 million of goodwill and intangible assets, net, on our Consolidated Balance Sheets.
Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.
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Historically, accounts receivable write-offs and write-offs related to equipment not returned by customers have not been significant and have averaged less than 1% of total revenues over the last five years.
−Removed: If economic conditions deteriorate, we may see an increase in credit losses relative to historical levels, which may materially and adversely affect our operations.
+Added: If economic conditions deteriorate, we may see an
+Added: increase in credit losses relative to historical levels, which may materially and adversely affect our operations.
Business segments that experience significant market disruptions or declines may experience increased customer credit risk and higher credit losses.
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We also could incur costs or liabilities related to waste disposal or remediating soil or groundwater contamination at our properties, at our customers’ properties or at third party landfill and disposal sites.
−Removed: These liabilities
−Removed: can be imposed on the parties generating, transporting or disposing of such substances or on the owner or operator of any affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances.
+Added: These liabilities can be imposed on the parties generating, transporting or disposing of such substances or on the owner or operator of any affected property, often without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances.
Several aspects of our businesses involve risks of environmental and health and safety liability.
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We do not maintain financial reserves for policy deductibles and our insurance policies contain exclusions that are customary for our industry, including exclusions for earthquakes, flood and terrorism.
−Removed: If any of our facilities or a significant amount of our rental equipment were to experience a catastrophic loss, it could disrupt our operations, delay orders, shipments and revenue recognition and result in expenses to repair or
−Removed: replace the damaged rental equipment and facility not covered by insurance, which could have a material adverse effect on our results of operations.
+Added: If any of our facilities or a significant amount of our rental equipment were to experience a catastrophic loss, it could disrupt our operations, delay orders, shipments and revenue recognition and result in expenses to repair or replace the damaged rental equipment and facility not covered by insurance, which could have a material adverse effect on our results of operations.
INTEREST RATE AND INDEBTEDNESS RISKS:
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These interest rate adjustments could cause periodic fluctuations in our operating results and cash flows.
−Removed: Our annual debt service obligations increase by approximately $5.4 million per year for each 1% increase in the average interest rate we pay based on the $544.3 million balance of variable rate debt outstanding at June 30, 2024.
+Added: Our annual debt service obligations increase by approximately $4.3 million per year for each 1% increase in the average interest rate we pay based on the $433.6 million balance of variable rate debt outstanding at September 30, 2024.
If interest rates rise in the future, and, particularly if they rise significantly, interest expense will increase and our net income will be negatively affected.
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We believe that interruptions or delays in the passage of facility bond measures or completion of state budgets, an insufficient amount of state funding, a significant reduction of funding to public schools, or changes negatively impacting enrollment may reduce the rental and sale demand for our educational products.
−Removed: Any reductions in funding available to the school districts from the states in which we do business may cause school districts to experience budget shortfalls and to reduce their demand for our products despite growing student populations, class size reduction initiatives and modernization and
−Removed: reconstruction project needs, which could reduce our revenues and operating income and consequently have a material adverse effect on the Company’s financial condition.
+Added: Any reductions in funding available to the school districts from the states in which we do business may cause school districts to experience budget shortfalls and to reduce their demand for our products despite growing student populations, class size reduction initiatives and modernization and reconstruction project needs, which could reduce our revenues and operating income and consequently have a material adverse effect on the Company’s financial condition.
Public policies that create demand for our products and services may change, resulting in decreased demand for or the pricing of our products and services, which could negatively affect our revenues and operating income.
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Similar to conventionally constructed buildings, the modular building industry, including the manufacturers and lessors of portable classrooms, are subject to regulations by multiple governmental agencies at the federal, state and local level relating to environmental, zoning, health, safety, energy efficiency, labor and transportation matters, among other matters.
−Removed: Failure to comply with these laws or regulations could impact our business or harm our reputation and result in higher capital or operating expenditures or the imposition of penalties or restrictions on our operations.
+Added: Failure to comply with these laws or
+Added: regulations could impact our business or harm our reputation and result in higher capital or operating expenditures or the imposition of penalties or restrictions on our operations.
As with conventional construction, typically new codes and regulations are not retroactively applied.
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We may not be able to quickly redeploy modular and container units returning from leases, which could negatively affect our financial performance and our ability to expand, or utilize, our rental fleet.
−Removed: As of June 30, 2024, 60% of our modular and 55% of our container portfolios had equipment on rent for periods exceeding the original committed term.
+Added: As of September 30, 2024, 62% of our modular and 58% of our container portfolios had equipment on rent for periods exceeding the original committed term.
Generally, when a customer continues to rent the units beyond the contractual term, the equipment rents on a month-to-month basis.
If a significant number of our rented units were returned during a short period of time, particularly those units that are rented on a month-to-month basis, a large supply of units would need to be remarketed.
−Removed: Our failure to effectively remarket a large influx of units returning from leases could negatively affect our financial performance and our ability to continue expanding our
−Removed: rental fleet.
+Added: Our failure to effectively remarket a large influx of units returning from leases could negatively affect our financial performance and our ability to continue expanding our rental fleet.
In addition, if returned units stay off rent for an extended period of time, we may incur additional costs to securely store and maintain them.
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TRS-RenTelco’s revenues are derived from the rental and sale of general purpose and communications test equipment to a broad range of companies, from Fortune 500 to middle and smaller market companies, in the aerospace, defense, communications, manufacturing and semiconductor industries.
−Removed: Electronic test equipment rental and sales revenues are primarily affected by the business activity within these industries related to research and development, manufacturing, and communication infrastructure installation and
+Added: Electronic test equipment rental and sales revenues are primarily affected by the business activity within these industries related to research and development, manufacturing, and communication infrastructure installation and maintenance.
Historically, these industries have been cyclical and have experienced periodic downturns, which can have a material adverse impact on the industry’s demand for equipment, including our rental electronic test equipment.
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However, any prolonged economic downturn could result in unexpected bankruptcies or reduced support from our manufacturers.
−Removed: Failure to properly select, manage and respond to the technological needs of our customers and changes to our products through their technology life cycle may cause certain electronic test equipment to become obsolete, resulting in impairment charges, which may negatively impact operating results and cash flows.
+Added: Failure to properly select, manage and respond to
+Added: the technological needs of our customers and changes to our products through their technology life cycle may cause certain electronic test equipment to become obsolete, resulting in impairment charges, which may negatively impact operating results and cash flows.
If we do not effectively compete in the rental equipment market, our operating results will be materially and adversely affected.
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In recent years some of our customers have expanded their international operations faster than domestic operations, and this trend may continue.
−Removed: time, the amount of our international business may increase if we focus on international market opportunities.
+Added: Over time, the amount of our international business may increase if we focus on international market opportunities.
Operating in foreign countries subjects the Company to additional risks, any of which may adversely impact our future operating results, including:
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There is also no guarantee that this change will have the desired effect.
−Removed: Failure of investors or analysts to understand our revised segment reporting structure may negatively affect their ability to understand our business and operating results which could adversely affect our stock price.
+Added: Failure of investors or analysts to understand our revised segment
+Added: reporting structure may negatively affect their ability to understand our business and operating results which could adversely affect our stock price.
In addition, we test for goodwill impairment at the reporting segment level and consider the difference between the fair value of a reporting segment and its’ carrying value, when determining whether any impairment exists.
There can be no assurance that the change to our segment reporting structure will not result in impairment charges in future periods.
−Removed: Unregistered Sales of Equity Securities and Use of Proceeds
−Removed: Defaults Upon Senior Securities
−Removed: Mine Safety Disclosures
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.