What changed in this filing

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Item 1. Financial Statements

2025-04-24 compared with 2024-10-24 · 108 added, 292 removed, 284 unchanged (58% of the section changed)

4 unchanged sentences

Results of review of interim financial statements

We have reviewed the accompanying condensed consolidated balance sheet of McGrath RentCorp (a California Corporation) and subsidiaries (the “Company”) as of September 30, 2024, and the related condensed consolidated statements of income, comprehensive income, and shareholders’ equity, for the three-month and nine-month periods ended September 30, 2024 and 2023, cash flows for the nine-month periods ended September 30, 2024 and 2023, and the related notes (collectively referred to as the “interim financial statements”).

We have reviewed the accompanying condensed consolidated balance sheet of McGrath RentCorp (a California Corporation) and subsidiaries (the “Company”) as of March 31, 2025, and the related condensed consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows as of March 31, 2025 and for the three-month periods ended March 31, 2025 and 2024, and the related notes (collectively referred to as the “interim financial statements”).

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

12 unchanged sentences

San Francisco, California

October 24, 2024

April 24, 2025

MCGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share amounts)

14 unchanged sentences

Foreign currency exchange (gain) loss

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

WillScot Mobile Mini transaction costs

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:

WillScot Mobile Mini transaction costs (Note 1)

Income before provision for income taxes

Provision for income taxes

Earnings per share:

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

5 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands)

Accounts receivable, net of allowance for credit losses of $ 2,866 at September 30, 2024 and $ 2,801 at December 31, 2023

Accounts receivable, net of allowance for credit losses of $ 2,866 at March 31, 2025 and at December 31, 2024

Rental equipment, at cost:

16 unchanged sentences

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

Issued and outstanding - 24,551 shares as of September 30, 2024 and 24,496 shares as of December 31, 2023

Issued and outstanding - 24,606 shares as of March 31, 2025 and 24,551 shares as of December 31, 2024

Retained earnings

Accumulated other comprehensive loss

Total shareholders’ equity

15 unchanged sentences

Balance at March 31, 2025

Share-based compensation

Common stock issued under stock plans, net of shares

withheld for employee taxes

Dividends accrued of $ 0.475 per share

Other comprehensive income

Balance at June 30, 2024

Share-based compensation

Common stock issued under stock plans, net of shares

withheld for employee taxes

Dividends accrued of $ 0.475 per share

Other comprehensive loss

Balance at September 30, 2024

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

9 unchanged sentences

Dividends accrued of $ 0.475 per share

Other comprehensive loss

Balance at March 31, 2023

Share-based compensation

Common stock issued under stock plans, net of shares

withheld for employee taxes

Taxes paid related to net share settlement of stock awards

Dividends accrued of $ 0.465 per share

Other comprehensive income

Balance at June 30, 2023

Share-based compensation

Common stock issued under stock plans, net of shares

withheld for employee taxes

Dividends accrued of $ 0.465 per share

Other comprehensive income

Balance at September 30, 2023

Balance at March 31, 2024

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

1 unchanged sentence

CONDENSED Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

7 unchanged sentences

Gain on sale of property, plant and equipment

Gain on sale of discontinued operations

Gain on sale of used rental equipment

Foreign currency exchange gain

Foreign currency exchange (gain) loss

Amortization of debt issuance costs

6 unchanged sentences

Cash Flows from Investing Activities:

Proceeds from sale of discontinued operations

Purchases of rental equipment

Purchases of property, plant and equipment

Cash paid for acquisition of businesses

Cash paid for acquisition of business assets

Proceeds from sales of used rental equipment

3 unchanged sentences

Net (payments) borrowings under bank lines of credit

Borrowings under term note agreement

Taxes paid related to net share settlement of stock awards

1 unchanged sentence

Net cash (used in) provided by financing activities

Effect of foreign currency exchange rate changes on cash

Net increase in cash

2 unchanged sentences

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

Net income taxes (refunded) paid, during the period

Net income taxes paid, during the period

Dividends accrued during the period, not yet paid

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2024

March 31, 2025

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The condensed consolidated financial statements for the nine months ended September 30, 2024 and 2023 have not been audited, but in the opinion of management, all adjustments (consisting of normal recurring accruals, consolidating and eliminating entries) necessary for the fair presentation of the consolidated financial position, results of operations and cash flows of McGrath RentCorp (the “Company”) have been made.

The condensed consolidated financial statements for the three months ended March 31, 2025 and 2024 have not been audited, but in the opinion of management, all adjustments (consisting of normal recurring accruals, consolidating and eliminating entries) necessary for the fair presentation of the consolidated financial position, results of operations and cash flows of McGrath RentCorp (the “Company”) have been made.

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

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

The consolidated results for the three and nine months ended September 30, 2024, should not be considered as necessarily indicative of the consolidated results for the entire fiscal year.

The consolidated results for the three months ended March 31, 2025, should not be considered as necessarily indicative of the consolidated results for the entire fiscal year.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K, filed with the SEC on February 19, 2025 for the year ended December 31, 2024 (the “2024 Annual Report”).

3 unchanged sentences

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

Expenses recognized as a result of the terminated Merger Agreement during the three and nine months ended September 30, 2024, were $ 39.4 million and $ 61.2 million, respectively.

The termination payment received of $ 180.0 million, net of transaction costs, resulted in net proceeds received of $ 118.8 million during the nine months ended September 30, 2024.

The Company determined that the transaction costs incurred on the terminated Merger Agreement were significant and required separate presentation on the Company's condensed consolidated statements of income for the three and nine-months ended September 30, 2024.

Due to this determination, the Company has excluded such transaction costs from Selling and administrative expenses.

Transaction costs incurred by the Company of $21.7 million and $9.4 million for the six-months ended June 30, 2024, and three-months ended March 31, 2024, respectively, have been reclassified from Selling and administrative expenses and reported separately on the condensed consolidated statements of income as non-operating expenses.

Expenses recognized as a result of the terminated merger totaled $ 9.4 million and $ 63.2 million for the three and twelve month periods ended March 31, 2024 and December 31, 2024, respectively.

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.

NEW ACCOUNTING PRONOUNCEMENTS

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.

Additionally, this ASU will also require the disclosure of income tax expense or benefit from 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.

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.

IMPLEMENTED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2024, the Company adopted the 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 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 Industries, 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.

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 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 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 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.

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 its 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 table reports the actual results of the Company for the nine months ended September 30, 2024, and the unaudited pro forma financial information for the nine months ended September 30, 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 nine months ended September 30, 2023, 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:

Nine months ended September 30,

(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 were $ 8.8 million, with $ 6.7 million and $ 2.1 million incurred 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 condensed consolidated statements of income for the nine months ended September 30, 2023:

(dollar amounts in thousands)

Nine Months Ended September 30,

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, which was the most recently audited period prior to divestiture:

(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 nine months ended September 30, 2023, significant operating and investing items related to Adler Tanks were as follows:

September 30,

(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 following table presents the reconciliation of income from discontinued operations to Adjusted EBITDA for the nine months ended September 30, 2023:

September 30,

(in thousands)

Income from discontinued operations

Provision for income taxes from discontinued operations

Interest expense

Depreciation and amortization

Share-based compensation

Transaction costs

Adjusted EBITDA from discontinued operations

REVENUE RECOGNITION

8 unchanged sentences

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.

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.

1 unchanged sentence

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 $ 49.1 million and $ 40.7 million at September 30, 2024 and December 31, 2023, respectively.

Sales revenues totaling $ 10.6 million and $ 26.3 million were recognized during the three and nine months ended September 30, 2024, respectively, which were included in the contract liability balance at December 31, 2023.

The contract liabilities included in Deferred income on the Company’s Consolidated Balance Sheets totaled $ 48.0 million and $ 35.4 million at March 31, 2025 and December 31, 2024, respectively.

Sales revenues totaling $ 14.9 million were recognized during the three months ended March 31, 2025, which were included in the contract liability balance at December 31, 2024.

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 $ 16.7 million and $ 8.7 million at September 30, 2024 and December 31, 2023, respectively.

The Company did not recognize any material contract asset impairments during the periods ended September 30, 2024 and December 31, 2023, respectively.

These unbilled contract assets are included in Accounts receivable on the Company’s Consolidated Balance Sheets and totaled $ 17.9 million and $ 13.0 million at March 31, 2025 and December 31, 2024, respectively.

The Company did not recognize any material contract asset impairments during the periods ended March 31, 2025 and December 31, 2024, respectively.

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 September 30, 2024, approximately $ 67.1 million of revenue is expected to be recognized for unsatisfied or partially satisfied obligations.

The Company expects 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.

For the three and nine months ended September 30, 2024, approximately $ 96.9 million and $ 198.9 million of revenue was recognized for sales and non-lease services transferred at a point in time, respectively, and approximately $ 16.6 million and $ 28.2 million of revenue was recognized for sales and non-lease services transferred over time, respectively.

As of March 31, 2025, approximately $ 40.5 million of revenue is expected to be recognized for unsatisfied or partially satisfied obligations.

The Company expects 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.

For the three months ended March 31, 2025, approximately $ 37.2 million of revenue was recognized for sales and non-lease services transferred at a point in time and approximately $ 10.3 million of revenue was recognized for sales and non-lease services transferred over time, respectively.

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

11 unchanged sentences

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

As of the nine months ended September 30, 2024, the Company’s future minimum lease payments to be received under non-cancelable finance leases were $ 2.4 million.

Of the total investment in sales-type leases, future minimum lease payments are expected to be $ 1.7 million in 2025, $ 0.5 million in 2026, and $ 0.2 million in 2027.

The Company’s assessment of current expected losses on these receivables was immaterial and therefore no credit loss expense was provided as of the nine months ended September 30, 2024.

As of the three months ended March 31, 2025, the Company’s future minimum lease payments to be received under non-cancelable finance leases were $ 6.4 million.

Of the total investment in sales-type leases, future minimum lease payments are expected to be $ 2.3 million in 2026, $ 1.2 million in 2027, $ 1.0 million in 2028, $ 1.1 million in 2029 and $ 0.8 million in 2030.

The Company’s assessment of current expected losses on these receivables was immaterial and therefore no credit loss expense was provided as of the three months ended March 31, 2025.

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

In the three and nine months ended September 30, 2024, the Company’s lease revenues were $ 153.3 million and $ 440.1 million, respectively, consisting of $ 152.7 million and $ 438.5 million of operating lease revenues, respectively, and $ 0.5 million and $ 1.6 million of finance lease revenues, respectively.

In the three months ended March 31, 2025, the Company’s lease revenues were $ 147.9 million, consisting of $ 147.1 million of operating lease revenues and $ 0.8 million of finance lease revenues.

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

1 unchanged sentence

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

The Company’s finance lease revenues for the three and nine months ended September 30, 2024 include $ 0.4 million and $ 1.3 million of sales revenues, respectively, and $ 0.1 million and $ 0.3 million of interest income, respectively.

The Company’s finance lease revenues for the three months ended March 31, 2025, include $ 0.6 million of sales revenues and $ 0.2 million of interest income.

Non-Lease Revenues

2 unchanged sentences

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 contract 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 and nine months ended September 30, 2024 and 2023:

(in thousands)

Portable Storage

Three Months Ended September 30,

Rental related services

Total non-lease

Total revenues

Rental related services

Total non-lease

Total revenues

Nine Months Ended September 30,

Three Months Ended March 31,

Rental related services

13 unchanged sentences

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.

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

These types of sales are infrequent in occurrence and reported on the condensed 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 condensed consolidated balance sheets.

4 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

calculating diluted earnings per share

There were no anti-dilutive securities excluded from the computation of diluted earnings per share for the nine months ended September 30, 2024, and 1,800 anti-dilutive securities excluded from the computation of diluted earnings per share for the nine months ended September 30, 2023.

There were 86,219 and 73,190 anti-dilutive securities excluded from the computation of diluted earnings per share for the three months ended March 31, 2025, and 2024, respectively.

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").

3 unchanged sentences

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

There were no shares repurchased during the three and nine months ended September 30, 2024 and 2023.

As of September 30, 2024, 2,000,000 shares were authorized for repurchase under the Repurchase Plan.

There were no shares repurchased during the three months ended March 31, 2025 and 2024.

As of March 31, 2025, 2,000,000 shares were authorized for repurchase under the Repurchase Plan.

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

3 unchanged sentences

(dollar amounts in thousands)

September 30,

Raw materials

6 unchanged sentences

Net book value

September 30, 2024

March 31, 2025

Customer relationships

13 unchanged sentences

The Company last conducted a qualitative analysis of its goodwill and intangible assets in the fourth quarter 2024, with no indicators of impairment.

In addition, no impairment triggering events occurred during the nine months ended September 30, 2024, and there were no changes to the carrying value of goodwill during this period.

In addition, no impairment triggering events occurred during the three months ended March 31, 2025, and there were no changes to the carrying value of goodwill during this period.

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

1 unchanged sentence

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

Amortization expense in the nine months ended September 30, 2024 and 2023, was $ 7.7 million and $ 7.8 million, respectively.

Based on the carrying values at September 30, 2024, and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be $ 2.6 million for the remainder of fiscal year 2024, $ 10.2 million in 2025, $ 9.8 million in 2026, $ 9.6 million in 2027, $ 8.2 million in 2028 and $ 4.7 million in 2029.

Amortization expense incurred during the three months ended March 31, 2025 and 2024, was $ 2.6 million for both periods.

Based on the carrying values at March 31, 2025, and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be $ 7.7 million for the remainder of fiscal year 2025, $ 9.8 million in 2026, $ 9.6 million in 2027, $ 8.2 million in 2028, $ 4.7 million in 2029 and $ 3.0 million in 2030.

SEGMENT REPORTING

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.

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 of the condensed consolidated financial statements.

At September 30, 2024, the Company was comprised of four reportable segments:

(1) its modular building segment (“Mobile Modular”);

(2) its portable storage container segment ("Portable Storage");

(3) its electronic test equipment segment (“TRS-RenTelco”);

and (4) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”).

The operations of each of these segments are described in Part I – Item 1, “Business,” and the accounting policies of the segments are described in “Note 1 – Summary of Significant Accounting Policies” in the Company’s 2023 Annual Report.

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

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.

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

In addition to the evaluation of the aforementioned key measures of each reportable segment, the CODM and senior 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.

The CODM is the primary individual in control of resource allocation, and the allocation determinations are made in consultation with the Company’s senior management team, of which the CODM is a member.

The most significant allocation determinations made by the CODM pertain to purchases of rental equipment and employee headcount.

These determinations are generally made as part of the annual budgeting process, with regular reviews occurring throughout the year that can result in allocation changes depending upon performance against budget.

On a monthly basis, the CODM considers period end and average rental equipment utilization and budget-to-actual variances to gross profit, income from operations and income before provision for income taxes when making decisions about allocating capital and employee resources to the segments.

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, intangible assets, accounts receivable, deferred income and customer security deposits.

During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement with WillScot Mobile Mini were significant and required separate presentation.

For the three and nine-months ended September 30, 2024, the Company has reported the terminated Merger Agreement transaction costs in the Corporate segment and excluded such costs from Selling and administrative expenses.

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 nine months ended September 30, 2024 and 2023 for the Company’s reportable segments are shown in the following table:

Summarized financial information for the three months ended March 31, 2025 and 2024, for the Company’s reportable segments is shown in the following tables:

(dollar amounts in thousands)

Portable Storage

Corporate (Unallocated)

Nine Months Ended September 30,

Three Months Ended March 31,

Rental revenues

Rental related services revenues

Sales and other revenues

Total revenues

Costs of Revenues

Depreciation of rental equipment

Selling and administrative expenses

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

Income from operations

Interest expense (income) allocation

Gain on merger termination from WillScot Mobile Mini 3

WillScot Mobile Mini transaction costs 4

Foreign currency exchange gain

Income before provision for income taxes

Other Selected Information

Rental equipment acquisitions

4 unchanged sentences

Average utilization 2

(dollar amounts in thousands)

Portable Storage

Three Months Ended March 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 (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

Income from operations

Interest expense (income) allocation

Income (loss) before provision for income taxes

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

WillScot Mobile Mini transaction costs

Income before provision for income taxes

Other Selected Information

Rental equipment acquisitions

4 unchanged sentences

Average utilization 2

Gross Enviroplex sales revenues were $ 30,593 and $ 16,401 for the nine months ended September 30, 2024 and 2023, respectively.

There were $ 2 and $ 218 of inter-segment sales to Mobile Modular in the nine months ended September 30, 2024 and 2023, respectively, which required elimination in consolidation.

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

Gross Enviroplex sales revenues were $ 7,213 and $ 1,719 for the three months ended March 31, 2025 and 2024, respectively.

There were no inter-segment sales to Mobile Modular in the three months ended March 31, 2025 and $ 1,845 inter-segment sales to Mobile Modular for the same period in 2024, which required elimination in consolidation.

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

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

During the period ended September 30, 2024, the Company received $ 180 million in cash proceeds attributed to the mutual decision to terminate the Merger Agreement.

These proceeds are reported as non-operating income on the Company's Condensed Consolidated Statements of Income and are reported in the Company's Corporate segment.

During the period ended September 30, 2024, the Company determined that transaction costs incurred by the Company attributed to the terminated Merger Agreement were significant.

Due to this determination, the Company has separately reported these transaction costs in the Company's Corporate segment and excluded such costs from Selling and administrative expenses.

The total transaction costs excluded from Selling and administrative expenses for the six months ended June 30, 2024, and the three months ended March 31, 2024, for Mobile Modular, Portable Storage and TRS-RenTelco was $ 15.5 million, $ 2.6 million and $ 3.6 million, respectively, and $ 6.5 million, $ 1.2 million and $ 1.7 million, respectively.

No single customer accounted for more than 10% of total revenues for the nine months ended September 30, 2024 and 2023.

Revenues from foreign country customers accounted for 2 % and 3 % of the Company’s total revenues for the same periods, respectively.

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 credit losses.

No single customer accounted for more than 10 % of total revenues for the three months ended March 31, 2025 and 2024.

Revenues from foreign country customers accounted for 2 % of the Company’s total revenues for the same periods.

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

What changed 10-Q

Item 1. Financial Statements