mgrc-10q_20200331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITY AND EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITY AND EXCHANGE ACT OF 1934

Commission file number 0-13292

 

McGRATH RENTCORP

(Exact name of registrant as specified in its Charter)

 

  California

94-2579843

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

5700 Las Positas Road , Livermore , CA 94551-7800

(Address of principal executive offices)

Registrant’s telephone number:  ( 925 ) 606-9200

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

MGRC

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.     Yes        No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes        No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

☒ 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

  

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period of complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

As of April 28, 2020, 24,149,522 shares of Registrant’s Common Stock were outstanding.

 

FORWARD LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, regarding McGrath RentCorp’s (the “Company’s”) expectations, strategies, prospects or targets are forward looking statements.  These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology.

Management cautions that forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. Further, our future business, financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties as set forth under “Risk Factors” in this Form 10-Q.

Forward-looking statements are made only as of the date of this Form 10-Q and are based on management’s reasonable assumptions, however these assumptions can be wrong or affected by known or unknown risks and uncertainties.   No forward-looking statement can be guaranteed and subsequent facts or circumstances may contradict, obviate, undermine or otherwise fail to support or substantiate such statements.  Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. Except as otherwise required by law, we are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results or to changes in our expectations.

 

 


Part I - Financial Information

Item 1. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of Directors and Shareholders

 

McGrath RentCorp

 

Results of review of interim financial statements

We have reviewed the accompanying condensed consolidated balance sheet of McGrath RentCorp, and subsidiaries (the “Company”) as of March 31, 2020 and the related condensed consolidated statements of income, comprehensive income, cash flows and shareholders’ equity for the three-months ended March 31, 2020 and 2019, 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.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2019, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2020, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for review results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

/s/ GRANT THORNTON LLP

San Jose, California

April 29, 2020

 

 

2


McGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

(in thousands, except per share amounts)

 

2020

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

Rental

 

$

89,506

 

 

$

82,696

 

Rental related services

 

 

24,511

 

 

 

21,455

 

Rental operations

 

 

114,017

 

 

 

104,151

 

Sales

 

 

14,366

 

 

 

16,825

 

Other

 

 

1,070

 

 

 

1,032

 

Total revenues

 

 

129,453

 

 

 

122,008

 

Costs and Expenses

 

 

 

 

 

 

 

 

Direct costs of rental operations:

 

 

 

 

 

 

 

 

Depreciation of rental equipment

 

 

21,638

 

 

 

18,961

 

Rental related services

 

 

18,263

 

 

 

16,363

 

Other

 

 

19,453

 

 

 

19,733

 

Total direct costs of rental operations

 

 

59,354

 

 

 

55,057

 

Costs of sales

 

 

8,443

 

 

 

9,946

 

Total costs of revenues

 

 

67,797

 

 

 

65,003

 

Gross profit

 

 

61,656

 

 

 

57,005

 

Selling and administrative expenses

 

 

31,954

 

 

 

29,695

 

Income from operations

 

 

29,702

 

 

 

27,310

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

( 2,652

)

 

 

( 3,108

)

Foreign currency exchange (loss) gain

 

 

( 436

)

 

 

49

 

Income before provision for income taxes

 

 

26,614

 

 

 

24,251

 

Provision for income taxes

 

 

6,455

 

 

 

5,802

 

Net income

 

$

20,159

 

 

$

18,449

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.83

 

 

$

0.76

 

Diluted

 

$

0.81

 

 

$

0.75

 

Shares used in per share calculation:

 

 

 

 

 

 

 

 

Basic

 

 

24,292

 

 

 

24,195

 

Diluted

 

 

24,738

 

 

 

24,540

 

Cash dividends declared per share

 

$

0.420

 

 

$

0.375

 

 

 

 

 

 

 

 

 

 

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

 

3


McGRATH RENTCORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2020

 

 

2019

 

Net income

 

$

20,159

 

 

$

18,449

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

210

 

 

 

( 34

)

Tax benefit (provision)

 

 

( 52

)

 

 

7

 

Comprehensive income

 

$

20,317

 

 

$

18,422

 

 

 

 

 

 

 

 

 

 

 

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

 

4


McGrath RentCorp

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Cash

 

$

342

 

 

$

2,342

 

Accounts receivable, net of allowance for doubtful accounts of $ 2,200 in 2020

   and $ 1,883 in 2019

 

 

125,834

 

 

 

128,099

 

Rental equipment, at cost:

 

 

 

 

 

 

 

 

Relocatable modular buildings

 

 

883,076

 

 

 

868,807

 

Electronic test equipment

 

 

341,841

 

 

 

335,343

 

Liquid and solid containment tanks and boxes

 

 

315,581

 

 

 

316,261

 

 

 

 

1,540,498

 

 

 

1,520,411

 

Less accumulated depreciation

 

 

( 564,789

)

 

 

( 552,911

)

Rental equipment, net

 

 

975,709

 

 

 

967,500

 

Property, plant and equipment, net

 

 

132,075

 

 

 

131,047

 

Prepaid expenses and other assets

 

 

44,993

 

 

 

45,356

 

Intangible assets, net

 

 

7,279

 

 

 

7,334

 

Goodwill

 

 

28,197

 

 

 

28,197

 

Total assets

 

$

1,314,429

 

 

$

1,309,875

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Notes payable

 

$

291,544

 

 

$

293,431

 

Accounts payable and accrued liabilities

 

 

104,005

 

 

 

109,174

 

Deferred income

 

 

61,907

 

 

 

54,964

 

Deferred income taxes, net

 

 

219,369

 

 

 

218,270

 

Total liabilities

 

 

676,825

 

 

 

675,839

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Issued and outstanding - 24,182 shares as of March 31, 2020 and 24,296 shares as of December 31, 2019

 

 

106,957

 

 

 

106,360

 

Retained earnings

 

 

530,559

 

 

 

527,746

 

Accumulated other comprehensive loss

 

 

88

 

 

 

( 70

)

Total shareholders’ equity

 

 

637,604

 

 

 

634,036

 

Total liabilities and shareholders’ equity

 

$

1,314,429

 

 

$

1,309,875

 

 

 

 

 

 

 

 

 

 

 

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

 

 

5


McGrath RentCorp

CONDENSED Consolidated Statements OF SHAREHOLDERS’ EQUITY

(unaudited)

 

 

 

Common Stock

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders’

 

(in thousands, except per share amounts)

 

Shares

 

 

Amount

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2019

 

 

24,296

 

 

$

106,360

 

 

$

527,746

 

 

$

( 70

)

 

$

634,036

 

Net income

 

 

 

 

 

 

 

 

20,159

 

 

 

 

 

 

20,159

 

Share-based compensation

 

 

 

 

 

1,723

 

 

 

 

 

 

 

 

 

1,723

 

Common stock issued under stock plans, net of shares

   withheld for employee taxes

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchased common stock

 

 

( 164

)

 

 

( 725

)

 

 

( 7,127

)

 

 

 

 

 

 

( 7,852

)

Taxes paid related to net share settlement of stock awards

 

 

 

 

 

( 401

)

 

 

 

 

 

 

 

 

( 401

)

Dividends accrued of $ 0.42 per share

 

 

 

 

 

 

 

 

( 10,219

)

 

 

 

 

 

( 10,219

)

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

158

 

 

 

158

 

Balance at March 31, 2020

 

 

24,182

 

 

$

106,957

 

 

$

530,559

 

 

$

88

 

 

$

637,604

 

 

 

 

Common Stock

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders’

 

(in thousands, except per share amounts)

 

Shares

 

 

Amount

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2018

 

 

24,182

 

 

$

103,801

 

 

$

467,783

 

 

$

( 49

)

 

$

571,535

 

Net income

 

 

 

 

 

 

 

 

18,449

 

 

 

 

 

 

18,449

 

Share-based compensation

 

 

 

 

 

1,392

 

 

 

 

 

 

 

 

 

1,392

 

Common stock issued under stock plans, net of shares

   withheld for employee taxes

 

 

40

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxes paid related to net share settlement of stock awards

 

 

 

 

 

( 1,555

)

 

 

 

 

 

 

 

 

( 1,555

)

Dividends accrued of $ 0.375 per share

 

 

 

 

 

 

 

 

( 9,151

)

 

 

 

 

 

( 9,151

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

( 27

)

 

 

( 27

)

Balance at March 31, 2019

 

 

24,222

 

 

$

103,638

 

 

$

477,081

 

 

$

( 76

)

 

$

580,643

 

 

 

 

6


McGrath RentCorp

CONDENSED Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2020

 

 

2019

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

20,159

 

 

$

18,449

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

23,862

 

 

 

21,100

 

Provision for doubtful accounts

 

 

552

 

 

 

156

 

Share-based compensation

 

 

1,723

 

 

 

1,392

 

Gain on sale of used rental equipment

 

 

( 4,788

)

 

 

( 4,615

)

Foreign currency exchange loss (gain)

 

 

436

 

 

 

( 49

)

Amortization of debt issuance costs

 

 

3

 

 

 

3

 

     Change in:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,713

 

 

 

1,457

 

Prepaid expenses and other assets

 

 

363

 

 

 

( 11,520

)

Accounts payable and accrued liabilities

 

 

( 6,383

)

 

 

9,948

 

Deferred income

 

 

6,943

 

 

 

8,478

 

Deferred income taxes

 

 

1,099

 

 

 

1,707

 

Net cash provided by operating activities

 

 

45,682

 

 

 

46,506

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Purchases of rental equipment

 

 

( 35,374

)

 

 

( 34,132

)

Purchases of property, plant and equipment

 

 

( 3,196

)

 

 

( 2,753

)

Proceeds from sales of used rental equipment

 

 

10,356

 

 

 

9,233

 

Net cash used in investing activities

 

 

( 28,214

)

 

 

( 27,652

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Net repayment under bank lines of credit

 

 

( 1,890

)

 

 

( 9,103

)

Repurchase of common stock

 

 

( 7,852

)

 

 

 

Taxes paid related to net share settlement of stock awards

 

 

( 401

)

 

 

( 1,555

)

Payment of dividends

 

 

( 9,369

)

 

 

( 8,248

)

Net cash used in financing activities

 

 

( 19,512

)

 

 

( 18,906

)

Effect of foreign currency exchange rate changes on cash

 

 

44

 

 

 

( 14

)

Net decrease in cash

 

 

( 2,000

)

 

 

( 66

)

Cash balance, beginning of period

 

 

2,342

 

 

 

1,508

 

Cash balance, end of period

 

$

342

 

 

$

1,442

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Interest paid, during the period

 

$

2,859

 

 

$

2,828

 

Net income taxes paid, during the period

 

$

363

 

 

$

710

 

Dividends accrued during the period, not yet paid

 

$

10,218

 

 

$

9,088

 

Rental equipment acquisitions, not yet paid

 

$

6,537

 

 

$

11,004

 

 

 

 

 

 

 

 

 

 

 

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

 

 

7


McGRATH RENTCORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

 

 

NOTE 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The condensed consolidated financial statements for the three months ended March 31, 2020 and 2019 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 months ended March 31, 2020 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 25, 2020 for the year ended December 31, 2019 (the “2019 Annual Report”).

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, expected to reduce cost and complexity related to the accounting for income taxes.  The ASU removes specific exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles (GAAP).  It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intra-period tax allocation; exceptions to accounting for basis differences when there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.  The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods.  The Company is evaluating the impact of this guidance on its consolidated financial statements.

NOTE 3. IMPLEMENTED ACCOUNTING PRONOUNCEMENTS

 

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) effective January 1, 2020.  Under the new guidance, companies are required to present financial assets held at amortized cost and available for sale debt securities net of the amount expected to be collected.  The new guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability.  The adoption of this new guidance did not have a material impact on our condensed consolidated financial statements.

 

Trade accounts receivable

The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts receivable from operating lease and non-lease revenues.  The Company regularly reviews the allowance by considering factors such as historical payment experience and trends, the age of the accounts receivable balances, the Company’s operating segment, customer industry, credit quality and current economic conditions that may affect a customer’s ability to pay.  The Company recognized bad debt expense of $ 0.6 million and $ 0.2 million for the three months ended March 31, 2020 and 2019, respectively.  The allowance for doubtful accounts was $ 2.2 million and $ 1.9 million at March 31, 2020 and December 31, 2019, respectively.

 

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.  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.  The net investment in sales-type leases was $ 2.5 million at March 31, 2020 and $ 2.9 million at December 31, 2019.  The Company’s assessment of current expected losses on these receivables was not material and no credit loss expense was provided as of March 31, 2020.  The Company regularly reviews the allowance by considering factors such as historical payment experience, the age of the lease receivable balances, credit quality and current economic conditions that may affect a customer's ability to pay.  Lease receivables are considered past due 90 days after invoice.  The Company manages the credit risk in net investment in sales-type leases using a number of factors, including, but not limited to the following:  historical payment history, credit score, size of operations, length of time in business, industry, historical profitability, historical cash flows, liquidity and past due amounts.  The Company uses credit scores obtained from external credit bureaus as a key indicator for the purposes of determining

8


credit quality of its new customers.  The Company does not own available for sale debt securities or other financial assets at March 31, 2020.

NOTE 4. REVENUE RECOGNITION

The Company’s accounting for revenues is governed by two accounting standards.  The majority of the Company’s revenues are considered lease or lease related and are accounted for in accordance with Topic 842, Leases.   Revenues determined to be non-lease related are accounted for in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The Company accounts for revenues when approval and commitment from both parties have been obtained, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.  The Company typically recognizes non-lease related revenues at a point in time because the customer does not simultaneously consume the benefits of the Company’s promised goods and services, or performance obligations, and obtains control when delivery and installation are complete.  For contracts that have multiple performance obligations, the transaction price is allocated to each performance obligation in the contract based on the Company’s best estimate of the standalone selling prices of each distinct performance obligation in the contract.  The standalone selling price is typically determined based upon the expected cost plus an estimated margin of each performance obligation.  

The Company generally rents and sells to customers on 30 day payment terms.  The Company does not typically offer variable payment terms, or accept non-monetary consideration.  Amounts billed and due from the Company’s customers are classified as Accounts receivable on the Company’s consolidated balance sheet.  For certain sales of modular buildings, progress payments from the customer are received during the manufacturing of new equipment, or the preparation of used equipment.  The advance payments are not considered a significant financing component because the payments are used to meet working capital needs during the contract and to protect the Company from the customer failing to adequately complete their obligations under the contract.  These contract liabilities are included in Deferred income on the Company’s consolidated balance sheet and totaled $ 28.4 million and $ 17.5 million at March 31, 2020 and December 31, 2019, respectively.  Sales revenues totaling $ 2.7 million were recognized during the three months ended March 31, 2020, which were included in the contract liability balance at December 31, 2019.  For certain modular building sales, the customer retains a small portion of the contract price until full completion of the contract, which results in revenue earned in excess of billings.  These unbilled contract assets are included in Accounts receivable on the Company’s consolidated balance sheet and totaled $ 0.7 million and $ 1.0 million at March 31, 2020 and December 31, 2019, respectively.

Lease Revenues

Rental revenues from operating leases are recognized on a straight-line basis over the term of the lease for all operating segments.  Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned.  Rental related services revenues are primarily associated with relocatable modular buildings and liquid and solid containment tanks and boxes leases.  For modular building leases, rental related services revenues for modifications, delivery, installation, dismantle and return delivery are lease related because the payments are considered minimum lease payments that are an integral part of the negotiated lease agreement with the customer.  These revenues are recognized on a straight-line basis over the term of the lease. Certain leases are accounted for as finance 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 finance leases and rental income on facility leases.

In the three months ended March 31, 2020, the Company’s lease revenues were $ 102.2 million, consisting of $ 101.7 million of operating lease revenues and $ 0.5 million of finance lease revenues.  The Company has entered into finance leases to finance certain equipment sales to customers.  The lease agreements have a bargain purchase option at the end of the lease term.  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.  The Company’s finance lease revenues include $ 0.4 million of sales revenues and $ 0.1 million of interest income.  

Non-Lease Revenues

Non-lease revenues are recognized in the period when control of the performance obligation is transferred, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.  For liquid and solid containment solutions, portable storage containers and electronic test equipment, rental related services revenues for delivery and return delivery are considered non-lease revenues.

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.  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.

9


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 months ended March 31, 2020 and 2019:

 

(in thousands)

 

Mobile

Modular

 

 

TRS-

RenTelco

 

 

Adler

Tanks

 

 

Enviroplex

 

 

Consolidated

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing

 

$

59,235

 

 

$

28,220

 

 

$

14,780

 

 

$

 

 

$

102,235

 

Non-lease:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Rental related services

 

 

6,690

 

 

 

719

 

 

 

5,389

 

 

 

 

 

 

12,798

 

     Sales

 

 

7,256

 

 

 

4,673

 

 

 

498

 

 

 

1,503

 

 

 

13,930

 

     Other

 

 

17

 

 

 

451

 

 

 

22

 

 

 

 

 

 

490

 

     Total non-lease

 

 

13,963

 

 

 

5,843

 

 

 

5,909

 

 

 

1,503

 

 

 

27,218

 

          Total revenues

 

$

73,198

 

 

$

34,063

 

 

$

20,689

 

 

$

1,503

 

 

$

129,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing

 

$

53,743

 

 

$

24,680

 

 

$

17,084

 

 

$

 

 

$

95,507

 

Non-lease:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Rental related services

 

 

3,304

 

 

 

568

 

 

 

6,081

 

 

 

 

 

 

9,953

 

     Sales

 

 

8,000

 

 

 

4,979

 

 

 

270

 

 

 

2,805

 

 

 

16,054

 

     Other

 

 

45

 

 

 

449

 

 

 

 

 

 

 

 

 

494

 

     Total non-lease

 

 

11,349

 

 

 

5,996

 

 

 

6,351

 

 

 

2,805

 

 

 

26,501

 

          Total revenues

 

$

65,092

 

 

$

30,676

 

 

$

23,435