What changed in this filing

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Item 1A. Risk Factors

2022-04-28 compared with 2021-10-28 · 32 added, 29 removed, 417 unchanged (13% of the section changed)

20 unchanged sentences

supply chain delays or disruptions;

inflationary pressures leading to elevated costs for materials and labor;

our equipment mix, availability, utilization and pricing;

inflation in the cost of materials, labor and new rental equipment;

the mix, by state and country, of our revenues, personnel and assets;

21 unchanged sentences

The impact of COVID-19 on our operations, and the operations of our customers, suppliers and logistics providers, may harm our business.

We continue to monitor the ongoing impact of the COVID-19 outbreak around the globe.

We continue to monitor the ongoing impact of COVID-19 outbreak around the globe.

This includes evaluating the impact on our customers, suppliers, and logistics providers as well as evaluating governmental actions being taken to curtail the spread of the virus.

7 unchanged sentences

If we cannot successfully recruit and retain qualified personnel, our operating results and stock price may suffer.

We believe that our success is directly linked to the competent people in our organization, including our executive officers, senior managers and other key personnel, and in particular, Joseph Hanna, our Chief Executive Officer.

Personnel turnover can be costly and could materially and adversely impact our operating results and can potentially jeopardize the success of our current strategic initiatives.

9 unchanged sentences

If we cannot negotiate arrangements with third parties to produce our products or if the third parties fail to produce our products to our specifications or in a timely manner, our reputation and financial condition could be harmed.

A breach or an alleged breach of our information technology systems could subject us to liability, reputational damage or interrupt the operation of our business.

We are subject to information technology system failures, network disruptions and breaches in data security which could subject us to liability, reputational damage or interrupt the operation of our business.

We rely upon our information technology systems and infrastructure for our business.

We could experience theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers.

Similarly, data privacy breaches by those who access our systems may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, our employees, directors, customers or other business partners, may be exposed to unauthorized persons or to the public.

An alleged breach of our information technology system also could subject us to reputational damage.

We sustained an immaterial cybersecurity attack in 2021 involving ransomware that impacted certain of our systems, but was unsuccessful in its ability to disrupt our network.

Our investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, directors, contractor workers and their dependents and certain other persons.

Upon detection, we promptly undertook steps to address the incident, restored network systems and resumed normal operations.

The attack did not result in any material disruption to our operations or ability to service our customers, and did not affect our financial performance.

In the future, we could experience additional breaches of our security measures resulting in the theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers.

Similarly, additional data privacy breaches by those who access our systems may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, our employees, customers or other business partners, may be exposed to unauthorized persons or to the public.

The immaterial breach of our information technology system and any future breaches could subject us to reputational damage.

Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect.

There can be no assurance that our efforts to protect our data and information technology systems will prevent breaches in our systems (or that of our third-party providers) that could adversely affect our business and result in financial and reputational harm to us, theft of trade secrets and other proprietary information, legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties.

There can be no assurance that our efforts to protect our data and information technology systems will prevent future breaches in our systems (or that of our third-party providers) that could adversely affect our business and result in financial and reputational harm to us, theft of trade secrets and other proprietary information, legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties.

Disruptions in our information technology systems or failure to protect these systems against security breaches could adversely affect our business and results of operations.

1 unchanged sentence

Our information technology systems facilitate our ability to transact business, monitor and control our operations and adjust to changing market conditions.

Any disruption in our information technology systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively transact business, monitor and control our operations and adjust to changing market conditions in a timely manner.

In addition, because of recent advances in technology and well-known efforts on the part of computer hackers and cyber-terrorists to breach data security of companies, we face risks associated with potential failure to detect breaches or adequately protect critical corporate, customer and employee data, which, if released, could adversely impact our customer relationships, our reputation, and even violate privacy laws.

We sustained an immaterial cybersecurity attack in 2021 involving ransomware that impacted certain of our systems, but was unsuccessful in its ability to disrupt our network.

Upon detection, we promptly undertook steps to address the incident, restored network systems and resumed normal operations.

Any future cybersecurity attack causing disruption in our information technology systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively transact business, monitor and control our operations and adjust to changing market conditions in a timely manner.

In addition, because of recent advances in technology and well-known efforts on the part of computer hackers and cyber-terrorists to breach data security of companies, we face risks associated with failure to adequately protect critical corporate, customer and employee data, which could adversely impact our customer relationships, our reputation, and even violate privacy laws.

As part of our business, we develop, receive and retain confidential data about our company and our customers.

33 unchanged sentences

If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.

At September 30, 2021, we had $181.1 million of goodwill and intangible assets, net, on our consolidated balance sheets.

At March 31, 2022, we had $177.9 million of goodwill and intangible assets, net, on our consolidated balance sheets.

Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.

44 unchanged sentences

Accordingly, in addition to potential penalties for non-compliance, we may become liable, either contractually or by operation of law, for investigation, remediation and monitoring costs even if the contaminated property is not presently owned or operated by us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property.

In addition, certain parties

may be held liable for more than their “fair” share of environmental investigation and cleanup costs.

In addition, certain parties may be held liable for more than their “fair” share of environmental investigation and cleanup costs.

Contamination and exposure to hazardous substances or other contaminants such as mold can also result in claims for remediation or damages, including personal injury, property damage, and natural resources damage claims.

29 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources”) and our Credit Facility contain various covenants that limit our discretion in operating our business.

In particular, we are limited in our ability to merge, consolidate, reorganize or transfer substantially all of our assets, make investments, pay dividends or distributions, redeem or repurchase stock, change the nature of our business, enter into transactions with affiliates, incur indebtedness and create liens on our

assets to secure debt.

In addition, we are required to meet certain financial covenants under these instruments.

8 unchanged sentences

These interest rate adjustments could cause periodic fluctuations in our operating results and cash flows.

Our annual debt service obligations increase by approximately $3.0 million per year for each 1% increase in the average interest rate we pay based on the $299.5 million balance of variable rate debt outstanding at September 30, 2021.

Our annual debt service obligations increase by approximately $2.7 million per year for each 1% increase in the average interest rate we pay based on the $266.5 million balance of variable rate debt outstanding at December 31, 2021.

If interest rates rise in the future, and, particularly if they rise significantly, interest expense will increase and our net income will be negatively affected.

GENERAL RISKS:

Our effective tax rate may change and become less predictable as our business expands or business mix changes, or as a result of federal and state tax law changes, making our future earnings less predictable.

Our effective tax rate may change and become less predictable as our business expands, or as a result of federal and state tax law changes, making our future earnings less predictable.

We continue to consider expansion opportunities domestically and internationally for our rental businesses.

17 unchanged sentences

As a consequence of the most recent economic recession, many states and local governments experienced large budget deficits resulting in severe budgetary constraints among public school districts.

To the extent public school districts’ funding is reduced for the

rental and purchase of modular buildings, our business could be harmed and our results of operations negatively impacted.

To the extent public school districts’ funding is reduced for the rental and purchase of modular buildings, our business could be harmed and our results of operations negatively impacted.

We believe that interruptions or delays in the passage of facility bond measures or completion of state budgets, an insufficient amount of state funding, a significant reduction of funding to public schools, or changes negatively impacting enrollment may reduce the rental and sale demand for our educational products.

47 unchanged sentences

Some of our competitors in the modular building leasing industry, notably WillScot Corporation, have a greater range of products and services, greater financial and marketing resources, larger customer bases, and greater name recognition than we have.

WillScot Corporation completed the acquisitions of Modspace in August, 2018 and Mobile Mini in July, 2020.

WillScot Corporation completed the acquisition of Modspace in August, 2018 and Mobile Mini in July, 2020.

These combined competitors may be better able to respond to changes in the relocatable modular building market, to finance acquisitions, to fund internal growth and to compete for market share, any of which could harm our business.

We may not be able to quickly redeploy modular units returning from leases, which could negatively affect our financial performance and our ability to expand, or utilize, our rental fleet.

As of September 30, 2021, 63% of our modular portfolio had equipment on rent for periods exceeding the original committed term.

As of March 31, 2022, 64% of our modular portfolio had equipment on rent for periods exceeding the original committed term.

Generally, when a customer continues to rent the modular units beyond the contractual term, the equipment rents on a month-to-month basis.

If a significant number of our rented modular units were returned during a short period of time, particularly those units that are rented on a month-to-month basis, a large supply of units would need to be remarketed.

Our failure to effectively remarket a large influx of units returning from leases could negatively affect our financial performance and our ability to continue expanding our rental fleet.

Our failure to effectively remarket a large influx

of units returning from leases could negatively affect our financial performance and our ability to continue expanding our rental fleet.

In addition, if returned units stay off rent for an extended period of time , we may incur additional costs to securely store and maintain them.

2 unchanged sentences

The volume, timing and mix of maintenance and repair work on our rental equipment may vary quarter-to-quarter and year-to-year.

Generally, increases in labor and

raw material costs will also increase the acquisition cost of new modular units and increase the repair and maintenance costs of our fleet.

Generally, increases in labor and raw material costs will also increase the acquisition cost of new modular units and increase the repair and maintenance costs of our fleet.

We also maintain a fleet of service trucks and use subcontractor companies for the delivery, set-up, return delivery and dismantle of modulars for our customers.

23 unchanged sentences

Electronic test equipment rental and sales revenues are primarily affected by the business activity within these industries related to research and development, manufacturing, and communication infrastructure installation and maintenance.

Historically, these industries have been cyclical and have experienced periodic downturns, which can have a material adverse impact on the industry’s demand for equipment, including our rental electronic test equipment.

Historically, these industries have been cyclical and have experienced periodic downturns, which can have a material

adverse impact on the industry’s demand for equipment, including our rental electronic test equipment.

In addition, the severity and length of any downturn in an industry may also affect overall access to capital, which could adversely affect our customers and result in excess inventory and impairment charges.

2 unchanged sentences

Generally, rental activity declines in the fourth quarter month of December and the first quarter months of January and February.

These months may have lower rental activity due to holiday closures, particularly by larger companies, inclement weather and its impact

on various field related communications equipment rentals, and companies’ operational recovery from holiday closures which may impact the start-up of new projects coming online in the first quarter.

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

These seasonal factors historically have impacted quarterly results in each year’s first and fourth quarter, but we are unable to predict how such factors may impact future periods.

83 unchanged sentences

Changes in regulatory, or governmental, oversight of hydraulic fracturing could materially adversely affect the demand for our rental products and reduce our operating results and cash flows.

We believe that demand related to hydraulic fracturing has increased the total rental revenues and market size in recent years.

We believe that demand related to hydraulic fracturing has impacted the total rental revenues and market size in recent years.

Oil and gas exploration and extraction (including use of tanks for hydraulic fracturing to obtain shale oil and shale gas) are subject to numerous local, state and federal regulations.

In the three and nine months ended September 30, 2021, oil and gas exploration and production accounted for approximately 6% and 5% of Adler Tanks’ rental revenues, respectively, and approximately 1% of the Company’s total revenues.

In the three months ended March 31, 2022, oil and gas exploration and production accounted for approximately 6% of Adler Tanks’ rental revenues, and approximately 1% of the Company’s total revenues.

The hydraulic fracturing method of extraction has come under scrutiny in several states and by the Federal government due to the potential adverse effects that hydraulic fracturing, and the liquids and chemicals used, may have on water quality and public health.

31 unchanged sentences

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 1A. Risk Factors