What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-19 compared with 2024-02-21 · 195 added, 176 removed, 940 unchanged (28% of the section changed)

18 unchanged sentences

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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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 ("Management's Report").

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

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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

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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, 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 have audited the accompanying consolidated balance sheets of McGrath RentCorp (a California corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, 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, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 19, 2025 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 3 to the consolidated financial statements, the Company has adopted new accounting guidance in 2024 related to the disclosure of segment information in accordance with ASU 2023-07, Segment Reporting (Topic 280).

The adoption was retrospectively applied to 2023 and 2022.

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

Our responsibility is to express an opinion on the Company’s consolidated 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 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.

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.

/s/ GRANT THORNTON LLP

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Intangible assets, net

Assets of discontinued operations

Liabilities and Shareholders' Equity

Notes payable

Accounts payable and accrued liabilities

Accounts payable

Accrued liabilities

Deferred income

Deferred income taxes, net

Liabilities of discontinued operations

Total liabilities

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Selling and administrative expenses

Other income, net

Income from operations

Interest expense

Foreign currency exchange gain (loss)

Foreign currency exchange loss (gain)

Gain on merger termination from WillScot Mobile Mini (Note 1)

WillScot Mobile Mini transaction costs

Income from continuing operations before provision for income taxes

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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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Dividends accrued at $ 1.90 per share

Other comprehensive loss

Other comprehensive loss reclassification adjustment

Balance at December 31, 2024

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Depreciation and amortization

Deferred income taxes

Deferred income taxes (benefits)

Provision for credit losses

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Gain on sale of used rental equipment

Foreign currency exchange (gain) loss

Foreign currency exchange loss (gain)

Amortization of debt issuance costs

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Prepaid expenses and other assets

Accounts payable and accrued liabilities

Accounts payable

Accrued liabilities

Deferred income

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Cash paid for acquisition of business assets

Cash paid for acquisition of non-compete agreements

Proceeds from sales of used rental equipment

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Cash Flows from Financing Activities:

Net borrowings under bank lines of credit

Borrowings under senior note purchase agreement

Net (payments) borrowings under bank lines of credit

Borrowings under term note agreement

Principal payment of Series C senior notes

Principal payment of Series B senior notes

Taxes paid related to net share settlement of stock awards

Payment of dividends

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of foreign currency exchange rate changes on cash

Net increase (decrease) in cash

Net decrease in cash

Cash balance, beginning of period

1 unchanged sentence

Supplemental Disclosure of Cash Flow Information:

Gain on merger termination, net of transaction costs, presented under net cash provided by operating activities

Interest paid, during the period

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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.

Mutual decision to terminate Merger Agreement with WillScot Mobile Mini Holdings Corp.

As previously disclosed, 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, and Brunello Merger Sub II, LLC, a Delaware limited liability company and direct wholly owned subsidiary of WillScot Mobile Mini.

On September 17, 2024, the Company and WillScot Mobile Mini mutually agreed to terminate the Merger Agreement, effective upon WillScot Mobile Mini's cash payment of $ 180.0 million to the Company, which was received on September 20, 2024.

Transaction costs attributed to the Merger Agreement are reported in the Company's Corporate segment.

Expenses recognized as a result of the terminated merger during year ended December 31, 2024, were $ 63.2 million.

The termination payment received of $ 180.0 million, net of transaction costs, resulted in net proceeds received of $ 116.8 million during the year ended December 31, 2024.

The Company determined that the transaction costs incurred on the terminated merger were significant and required separate presentation on the Company's consolidated statements of income for the year ended December 31, 2024.

Due to this determination, the Company has excluded such transaction costs from Selling and administrative expenses and reported them separately on the consolidated statements of income as non-operating expenses.

Principles of Consolidation

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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.

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

Non-lease revenues - Sales revenue is recognized upon delivery and installation of the equipment to customers.

Certain leases are accounted for as sales-type leases.

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.

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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.

Inventories consist of raw materials and work-in-process.

Inventories are measured at the lower of actual cost or net realizable value for acquired units and estimated standard costs for manufactured units.

Net realizable value is defined as the value for which an asset can be sold, less the estimated costs of selling such asset.

The costs include expenditures incurred in acquiring the inventories, manufacturing, production costs, and other costs incurred in bringing them to their existing location and condition .

Property, Plant and Equipment

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Construction in progress at December 31, 2024 and 2023 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.

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

Capitalized Software Costs

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Capitalized software costs are included in property, plant and equipment.

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.

There were no capitalized internal use software costs during the year ended December 31, 2024, and the Company capitalized $ 0.2 million in internal use software during the year ended December 31, 2023.

Shipping Costs

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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, 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.

At December 31, 2024 and 2023, goodwill and trade name intangible assets from continuing operations which have indefinite lives totaled $ 323.4 million for both periods.

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

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.

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earnings per share

In 2023, 2 022 and 2021, there were no shares having an anti-dilutive effect requiring exclusion from the computation of diluted earnings per share.

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”).

In 2024, there were 37,214 shares which had an anti-dilutive effect on the computation of diluted earnings per share that required exclusion.

In both 2 023 and 2022, there were no shares having an anti-dilutive effect requiring exclusion from the computation of diluted earnings per share.

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, as amended (the "Exchange Act").

In September 2024, the Company's Board of Directors increased the capacity under the share repurchase program by authorizing the Company to repurchase up to 2,000,000 shares of the Company's outstanding common stock (the "Repurchase Plan"), an increase from the 1,309,805 remaining shares authorized for repurchase under the Repurchase Plan established in August 2015.

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.

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

There can be no assurance that any authorized shares will be repurchased, and the Repurchase Plan may be modified, extended or terminated by the

Company’s Board of Directors at any time.

In the twelve months ended December 31, 2024, 2023 and 2022 there were no shares of common stock repurchased.

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Net Investment in Sales-Type Leases

The Company enters into sales-type leases with certain qualified customers to purchase its rental equipment, primarily at its TRS-RenTelco operating segment.

The Company enters into sales-type leases with certain qualified customers to purchase its rental equipment, primarily at its Mobile Modular and TRS-RenTelco operating segments.

Sales-type leases have terms that generally range from 12 to 36 months and are collateralized by a security interest in the underlying rental asset.

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Fair Value of Financial Instruments

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 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 $ 169.4 million and $ 169.2 million, as of December 31, 2024 and 2023, respectively, compared to the recorded value of $ 175.0 million in both periods.

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.

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NEW ACCOUNTING PRONOUNCEMENTS

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.

In December 2023, the Financial Accounting Standards Board ("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.

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IMPLEMENTED ACCOUNTING PRONOUNCEMENTS

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.

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 .

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.

Effective December 15, 2024, the Company adopted ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280), which requires 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.

The adoption of this new guidance resulted in changes to "Note 16.

Segment Reporting" to the consolidated financial statements, impacting the presentation and disclosure of the Company's four reportable business segments.

Effective January 1, 2024, the Company adopted 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.

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

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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 assets acquired and liabilities assumed were based upon their fair values on the closing date.

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.

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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 .

The trade name intangible acquired from the Vesta Modular acquisition was 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 following table reports the actual results of the Company for the year ended December 31, 2024, and the unaudited pro forma financial information for the year ended December 31, 2023.

The 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 period 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.

The pro forma results for the year ended December 31, 2023, have been adjusted to include transaction related

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:

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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:

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

(in thousands)

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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, 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.

At December 31, 2023, the weighted-average remaining lease term for operating leases was 3.5 years and the weighted average discount rate was 4.94 %.

The Company had no sub-lease income during the year ended December 31, 2023, and did no t have any finance leases as of December 31, 2023.

At December 31, 2024 and 2023 the Company’s ROU assets and operating lease liabilities were $ 12.6 m illi on and $ 14.8 million, respectively, which are recorded in Prepaid expenses and other assets and Accrued liabilities on the Company’s Consolidated Balance Sheets.

During the years ended December 31, 2024 and 2023, operating lease expense was $ 6.4 million and $ 6.7 million, respectively, wh ich included short term lease expense of $ 0.3 million and $ 0.1 million, respectively.

At December 31, 2024 and 2023, the weighted-average remaining lease term for operating leases was 3.5 years and the weighted average discount rate was 5.37 % and 4.94 %, respectively.

The Company had no sub-lease income or finance leases during the years ended December 31, 2024 and 2023.

Supplemental cash flow information related to leases was as follows:

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These revenues are recognized on a straight-line basis over the term of the lease.

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.

Certain leases are accounted for as

sales-type leases.

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

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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.

Other Income, net

Other income, net consists of the net gain on sales of property, plant and equipment.

These sales are generally recognized at a point in time, with contractually defined performance obligations that are typically transferred upon the closing date of the sale.

These types of sales are infrequent in occurrence and reported on the consolidated statements of income within the scope of ASC 610, Other Income .

Proceeds to be received from the sale of property, plant and equipment are included in Accounts receivable on the Company's consolidated balance sheets.

NOTES PAYABLE

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(in thousands)

Unsecured revolving lines of credit

Unsecured revolving lines of credit and term loan

2.35 % Series E senior notes due in 2026

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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):

On April 23, 2024, the Company entered into a first incremental facility amendment with Bank of America, N.A., as Administrative Agent and the first incremental lender (“BoA”) and the guarantors named therein (the “First Incremental Amendment”).

The First Incremental Amendment amends the Second Amended and Restated Credit Agreement, dated as of July 15, 2022, as amended, by and among the Company, BoA, the other lenders named therein, and the guarantors named therein (the “Credit Agreement”) to institute an incremental term loan “A” facility in an aggregate principal amount of $ 75.0 million (the “Incremental Credit Facility”).

The proceeds from the Incremental Credit Facility were used for general corporate purposes.

Concurrently with entry into the First Incremental Amendment, the Company repaid revolving loans issued under the Credit Agreement in an aggregate amount equal to approximately $ 75.0 million.

At December 31, 2024, 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 $ 342.4 million was outstanding and had the capacity to borrow up to an additional $ 307.6 million.

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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The principal balance is due when the notes mature on September

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.

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

At December 31, 2024, the principal balance outstanding under the Series F Senior Notes was $ 75.0 million.

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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:

Income before provision for income taxes consisted of the following:

(in thousands)

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Enactment of the Tax Cuts and Jobs Act

Valuation allowance

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:

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Share-based compensation

Total deferred tax assets, net of valuation allowance of $ 0.2 million in 2023 and 2022

Total deferred tax assets

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, 2024, were $ 33.7 million and $ 16.7 million for federal and state jurisdictions, respectively, which are expected to result in a future federal and state tax benefit of $ 7.1 million and $ 0.3 million, respectively.

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As of December 31, 2024, the Company’s foreign net operating losses for tax purposes were $ 0.6 million.

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

These loss carry forwards have expired at the end of 2024 and the associated deferred tax assets and valuation allowance have been removed.

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 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 remained 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.

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There was no capitalized share-based compensation expense in the years ended December 31, 2024, 2023 and 2022.

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, 2024:

(in millions)

Balance at December 31, 2021

RSUs cancelled/forfeited/expired

Balance at December 31, 2022

RSUs cancelled/forfeited/expired

Balance at December 31, 2023

RSUs cancelled/forfeited/expired

Balance at December 31, 2024

Performance-based RSUs issued prior to 2018 vest over five years , with 60 % of the shares immediately vesting after three years when the performance criteria has been determined to have been met and 20 % of the remaining shares vesting annually at the anniversary of the performance determination date, subject to continuous employment of the participant.

The performance-based RSU grants issued in 2018 and thereafter vest after three years with 100 % of the shares vesting immediately when performance criteria has been determined to have been met.

There were 64,000 performance-based RSUs expected to vest as of December 31, 2024.

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 117,034 service-based RSUs expected to vest as of December 31, 2024.

No forfeitures are currently expected.

The total fair value of RSUs that vested during the years ended December 31, 2024, 2023 and 2022 based on the weighted average grant date values was $ 11.1 million, $ 8.6 million and $ 9.3 million, respectively.

Share-based compensation expense for RSUs for the years ended December 31, 2024, 2023 and 2022 was $ 9.5 million, $ 8.3 million and $ 7.9 million, respectively.

As of December 31, 2024, the total unrecognized compensation expense related to unvested RSUs was $ 10.9 million and is expected to be recognized over a weighted-average period of 1.2 years.

Stock Options

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 6,906,363 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.

As of December 31, 2024, no shares were outstanding under the 2016 Plan, and no options had been issued to the Company's non-employee advisors.

Additionally, 929,012 shares remained available for issuance under the stock plans.

A summary of the Company’s option activity and related information for the three years ended December 31, 2024 is as follows:

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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.

The aggregate intrinsic value of options exercised and sold under the Company’s stock option plans was less than $ 0.1 million, $ 9.4 million and $ 7.9 million for the years ended December 31, 2024, 2023 and 2022, respectively, determined as of the date of option exercise.

As of December 31, 2024, 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:

Options Outstanding

Options Exercisable

Exercise price

Number outstanding at December 31, 2023

Weighted-average

remaining contractual life

Weighted-average grant date value

Number exercisable at December 31, 2023

Weighted-average grant date value

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.

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No options were granted in the years ended December 31, 2024, 2023 and 2022.

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, 2023:

(in millions)

Balance at December 31, 2020

RSUs cancelled/forfeited/expired

Balance at December 31, 2021

RSUs cancelled/forfeited/expired

Balance at December 31, 2022

RSUs cancelled/forfeited/expired

Balance at December 31, 2023

The performance-based RSU grants issued in 2018 and thereafter vest after three years with 100 % of the shares vesting immediately when performance criteria has been determined to have been met.

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.

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

No forfeitures are currently expected.

The total fair value of RSUs that vested during the years ended December 31, 2023, 2022 and 2021 based on the weighted average grant date values was $ 8.6 million, $ 9.3 million and $ 9.2 million, respectively.

Share-based compensation expense for RSUs for the years ended December 31, 2023, 2022 and 2021 was $ 8.3 million, $ 7.9 million and $ 7.3 million, respectively.

As of December 31, 2023, the total unrecognized compensation expense related to unvested RSUs was $ 10.7 million and is expected to be recognized over a weighted-average period of 1.4 years.

Employee Stock Ownership and 401(k) Plans

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SHAREHOLDERS’ EQUITY

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.

There can be no assurance that any authorized shares will be repurchased and the repurchase program may be modified, extended or terminated by the Board of Directors at any time.

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

There were no shares of common stock repurchased during the twelve months ended December 31, 2024 and 2023.

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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.

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.

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At December 31, 2024 and 2023, accruals for the Company’s health and workers’ compensation high deductible plans were $ 1.7 million and $ 1.6 million, respectively.

The following table presents the carrying value of inventories:

(dollar amounts in thousands)

Raw materials

Work-in-process

GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill were as follows:

There were no changes in the carrying amount of goodwill during 2024.

Changes in the carrying amount of goodwill during 2023 were as follows:

(dollar amounts in thousands)

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Balance at December 31, 2022

Changes to Design Space purchase accounting

Balance at December 31, 2022

Goodwill acquired through business combination

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Non-compete agreements

Customer backlog

Total amortizing

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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.

In addition to this determination, the Company also divested its Adler Tanks business segment during the year ended December 31, 2023.

Additional information regarding the divestiture of Adler Tanks can be found in Note 5 to the Consolidated Financial Statements.

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.

The Company's Chief Operating Decision Maker ("CODM") Joe Hanna, Chief Executive Officer, and management focus on several key measures to evaluate and assess each segment’s performance including rental, rental related services and sales revenue growth, segment profit, and income before provision for income taxes.

In addition to the evaluation of the aforementioned key measures of each reportable segment, the CODM and management evaluate supplemental information by reportable segment such as rental equipment acquisitions, fleet utilization, and average utilization to further assess segment performance and the future allocation of Company resources.

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.

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Rental related services revenues

Sales and other revenues

Total revenues

Costs of Revenues

Depreciation of rental equipment

Selling and administrative expenses

Income (loss) from operations

Rental related services

Costs of sales

Total costs of revenues

Significant Segment Expenses 3

Wages and benefits

Depreciation and amortization

Marketing and administrative expenses

Allocated corporate services 4

Other segment items 5

Total expenses

Other income, net

Segment profit

Interest expense (income) allocation

Foreign currency exchange loss

Income before provision for income taxes

Reconciliation of Segment Profit (Loss)

Total segment gross profit

Segment operating expenses, net

Other income, net

Interest expense allocation

Foreign currency exchange loss

Gain on merger termination from WillScot Mobile Mini (Note 1)

WillScot Mobile Mini transaction costs

Income (loss) before provision for income taxes

Other Selected Information

Rental equipment acquisitions

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Average utilization 2

Segment Data (Continued)

(dollar amounts in thousands)

3 unchanged sentences

Rental related services revenues

Sales and other revenues

Total revenues

Costs of Revenues

Depreciation of rental equipment

Selling and administrative expenses

Income (loss) from operations

Rental related services

Costs of sales

Total costs of revenues

Significant Segment Expenses 3

Wages and benefits

Depreciation and amortization

Marketing and administrative expenses

Allocated corporate services 4

Other segment items 5

Total expenses

Other income, net

Segment profit (loss)

Interest expense (income) allocation

Foreign currency exchange (gain) loss

Income before provision for income taxes

Other Selected Information

Rental equipment acquisitions

4 unchanged sentences

Average utilization 2

(dollar amounts in thousands)

Portable Storage

Year Ended December 31,

Rental revenues

Rental related services revenues

Sales and other revenues

Total revenues

Costs of Revenues

Depreciation of rental equipment

Selling and administrative expenses

Income from operations

Rental related services

Costs of sales

Total costs of revenues

Significant Segment Expenses 3

Wages and benefits

Depreciation and amortization

Marketing and administrative expenses

Allocated corporate services 4

Other segment items 5

Total expenses

Segment profit (loss)

Interest expense (income) allocation

Income before benefit for income taxes

Foreign currency exchange loss

Income before provision for income taxes

Other Selected Information

Rental equipment acquisitions

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

The Significant Segment Expense categories and amounts align with the segment-level information that is regularly provided to the CODM.

Allocated corporate services costs are comprised of expenses incurred by the Company which are not directly incurred by each business segment as a part of their normal operations.

These allocated indirect corporate costs primarily include wages and benefits, depreciation of corporate capital assets, information technology, legal, accounting and other administrative expenses.

Other segment items for each reportable segment is primarily comprised of business acquisition and divestiture related transaction costs and credit losses.

No single customer accounted for more than 10% of total revenues during 2024, 2023 and 2022.

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

Revenue from foreign country customers accounted for 2 %, 3 % and 4 % of the Company’s total revenues for years 2024, 2023, and 2022, respectively.

Mobile Modular purchased 18 % of its modular units from one manufacturer during 2024 and 30 % in both 2023 and 2022.

There were no vendor or supplier concentrations for Portable Storage, TRS-RenTelco and Enviroplex during years 2024, 2023 and 2022.

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