Segments

12 Months Ended

Dec. 31, 2019

Note 3: Segments

We operate and have two reportable business segments, Equipment Rental and Sales (“ERS”) and Parts, Tools and Accessories (“PTA”). ERS provides rental solutions to utilities and contractors serving multiple infrastructure end-markets, including electric T&D, telecom, rail, lighting and signage. We rent and sell specialized equipment to utilities and utility contractors that build and maintain critical T&D infrastructure. Utilizing our national platform and rental fleet, we expanded our focus on equipment rental to the telecom, rail, lighting and signage end-markets. The majority of our existing equipment can be used across multiple end-markets and many of our customers operate in multiple end-markets. We rent and sell a broad range of new and used equipment including bucket trucks, digger derricks, line equipment, cranes, pressure diggers, rail mounted equipment and underground equipment. Our PTA segment offers customers sale and rental solutions for parts, tools and accessories to complement our specialty equipment line.

Our reportable segments align with the information our chief operating decision maker (“CODM”) receives on a regular basis to evaluate the performance of the business and to allocate resources. The accounting principles applied at the operating segment level in determining gross profit are generally the same as those applied at the consolidated financial statement level. There are no inter-segment revenues, and cost allocations to operating segment cost of revenue are minimal; that is, revenue, cost of equipment and parts sold or rented, depreciation of rental equipment and gross profit are directly attributed to each of the operating segments. The following tables present our financial information by segment:



Year Ended December 31, 2019
(in $000s)	ERS		PTA		Total

Rental revenue⁽¹⁾	$	182,720	$	15,276	$	197,996
Sales of rental equipment	23,767		—		23,767
Sales of new equipment	10,308		—		10,308
Parts sales and services	—		31,964		31,964
Total revenue	216,795		47,240		264,035
Cost of revenue	76,573		30,346		106,919
Depreciation of rental equipment	66,228		4,340		70,568
Gross profit	$	73,994	$	12,554	$	86,548



Year Ended December 31, 2018
(in $000s)	ERS		PTA		Total

Rental revenue⁽¹⁾⁽²⁾	$	173,267	$	11,296	$	184,563
Sales of rental equipment	26,019		—		26,019
Sales of new equipment	18,349		—		18,349
Parts sales and services	—		17,366		17,366
Total revenue	217,635		28,662		246,297
Cost of revenue	84,509		16,077		100,586
Depreciation of rental equipment	60,436		3,657		64,093
Gross profit	$	72,690	$	8,928	$	81,618



Year Ended December 31, 2017
(in $000s)	ERS		PTA		Total

Rental revenue⁽¹⁾⁽²⁾	$	152,993	$	7,895	$	160,888
Sales of rental equipment	17,162		—		17,162
Sales of new equipment	10,093		—		10,093
Parts sales and services	—		15,624		15,624
Total revenue	180,248		23,519		203,767
Cost of revenue	69,463		14,686		84,149
Depreciation of rental equipment	58,878		2,995		61,873
Gross profit	$	51,907	$	5,838	$	57,745

(1) As discussed in Note 2, Summary of Significant Accounting Policies, rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers as well as charges to customers for damaged equipment. Effective in 2019, $2.9 million of billings to customers for damages are classified in rental revenue, given that the amounts are directly related to the Company’s rental arrangements with its customers. Amounts for damages in comparable prior periods have been reclassified to rental revenue from parts sales and services ($3.2 million and $2.6 million for the years ended December 31, 2018 and 2017, respectively).

(2) Amounts for equipment rental revenue of $0.5 million and $0.9 million for the years ended December 31, 2018 and 2017, respectively, previously reported in the PTA segment as rental revenue have been reclassified to the ERS segment to align the reportable segment information to the information our CODM began receiving on a regular basis in 2019.

Total assets by segment are not disclosed herein because asset by operating segment data is not reviewed by the CODM as the basis to assess performance and allocate resources. Goodwill related to our ERS segment and PTA segment was $229.4 million and $8.8 million, respectively, as of December 31, 2019 and $223.4 million and $5.3 million as of December 31, 2018.

Gross profit is the primary operating result whereby our segments are evaluated for performance and resource allocation. The following table presents a reconciliation of segment gross profit to consolidated loss before income taxes:



	Year Ended December 31,
(in $000s)	2019			2018			2017

Gross profit	$	86,548		$	81,618		$	57,745
Selling, general and administrative expenses	34,667			32,718			27,555
Licensing and titling expenses	2,617			2,241			2,250
Amortization and non-rental depreciation	3,122			3,045			2,856
Transaction expenses	7,641			440			202
Asset impairment	657			—			610
Other operating expenses	1,826			10			784
Other (income) expense	1,690			287			366
Loss on extinguishment of debt	4,005			—			—
Interest expense, net	63,361			56,698			53,710
Loss before income taxes	$	(33,038	)	$	(13,821	)	$	(30,588	)

We are positioned to serve all 50 U.S. states and 13 Canadian provinces and territories using our network of locations in North America. The following tables present revenue by country and total assets by country:



	Year Ended December 31,
(in $000s)	2019		2018		2017

Revenue:
United States	$	257,297	$	237,815	$	193,600
Canada	5,705		6,297		8,583
Mexico⁽¹⁾	1,033		2,185		1,584
	$	264,035	$	246,297	$	203,767

(1) On September 27, 2019, the Company began commencing activities for the closure of its Mexican operations, which is part of the ERS segment. For the years ended December 31, 2019, 2018, and 2017, Mexico generated a loss before income taxes of $4.3 million $1.9 million and $1.7 million, respectively. The year ended December 31, 2019 included an impairment loss of $0.7 million and a charge for statutorily required termination benefits of $0.2 million (see Note 2).



	December 31,
(in $000s)	2019		2018

Assets:
United States	$	802,516	$	669,942
Canada	8,152		11,923
Mexico	4,616		9,691
	$	815,284	$	691,556

One customer served by both the ERS and the PTA segment generated 10.6% of our total revenue in 2018 with no customer over 10% in 2019 or 2017.