Segment Reporting

12 Months Ended

Dec. 31, 2019

NOTE 13. SEGMENT REPORTING

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, TRS-RenTelco, Adler Tanks and Enviroplex. Management focuses on several key measures to evaluate and assess each segment’s performance including rental revenue growth, gross margin, and income before provision for income taxes. Excluding interest expense, allocations of revenue and expense not directly associated with one of these segments are generally allocated to Mobile Modular, TRS-RenTelco and Adler Tanks, based on their pro-rata share of direct revenues. Interest expense is allocated amongst Mobile Modular, TRS-RenTelco and Adler Tanks 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 years ended December 31, 2019, 2018 and 2017, for the Company’s reportable segments is shown in the following tables:

(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex ¹			Consolidated
Year Ended December 31,
2019
Rental revenues	$	182,316		$	103,704		$	67,869		$	—		$	353,889
Rental related services revenues		69,395			3,260			28,383		—				101,038
Sales and other revenues		49,299			24,519			1,671			39,814			115,303
Total revenues		301,010			131,483			97,923			39,814			570,230
Depreciation of rental equipment		22,071			41,948			16,372		—				80,391
Gross profit		143,618			60,748			47,014			14,785			266,165
Selling and administrative expenses		65,699			24,645			29,321			5,128			124,793
Income from operations		77,919			36,103			17,693			9,657			141,372
Interest expense (income) allocation		7,946			1,970			3,436			(1,021	)		12,331
Income before provision for income taxes		69,973			34,217			14,257			10,678			129,125
Rental equipment acquisitions		75,433			89,759			4,826		—				170,018
Accounts receivable, net (period end)		83,182			23,788			17,281			3,848			128,099
Rental equipment, at cost (period end)		868,807			335,343			316,261		—				1,520,411
Rental equipment, net book value (period end)		610,048			172,413			185,039		—				967,500
Utilization (period end) ²		79.1	%		64.5	%		48.4	%
Average utilization ²		79.2	%		66.2	%		54.7	%

Segment Data (Continued) (dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex 1		Consolidated
Year Ended December 31,
2018
Rental revenues	$	159,136		$	89,937		$	69,701		$	—	$	318,774
Rental related services revenues		54,696			3,300			24,911		—			82,907
Sales and other revenues		40,742			25,420			1,441			29,046		96,649
Total revenues		254,574			118,657			96,053			29,046		498,330
Depreciation of rental equipment		21,200			36,011			15,928		—			73,139
Gross profit		120,750			54,773			48,055			9,673		233,251
Selling and administrative expenses		58,017			22,823			30,026			4,904		115,770
Income from operations		62,733			31,950			18,029			4,769		117,481
Interest expense (income) allocation		(7,132	)		(2,696	)		(3,252	)		783		(12,297	)
Income before benefit for income taxes		55,601			28,765			14,777			5,552		104,695
Rental equipment acquisitions		63,374			65,467			5,257		—			134,098
Accounts receivable, net (period end)		72,295			20,732			19,992			7,997		121,016
Rental equipment, at cost (period end)		817,375			285,052			313,573		—			1,416,000
Rental equipment, net book value (period end)		572,032			131,450			197,533		—			901,015
Utilization (period end) 2		79.3	%		62.1	%		56.4	%
Average utilization 2		78.2	%		62.7	%		59.9	%

2017
Rental revenues	$	142,584		$	82,812		$	64,021		$	—	$	289,417
Rental related services revenues		50,448			2,858			24,762		—			78,068
Sales and other revenues		38,234			22,374			2,572			31,369		94,549
Total revenues		231,266			108,044			91,355			31,369		462,034
Depreciation of rental equipment		21,247			32,891			15,770		—			69,908
Gross profit		103,935			50,289			43,218			8,903		206,345
Selling and administrative expenses		55,583			22,171			29,542			4,309		111,605
Income from operations		48,352			28,118			13,676			4,594		94,740
Interest expense (income) allocation		(6,671	)		(2,320	)		(3,071	)		440		(11,622	)
Income before provision for income taxes		41,681			26,132			10,605			5,034		83,452
Rental equipment acquisitions		34,526			58,781			4,800		—			98,107
Accounts receivable, net (period end)		59,274			19,581			18,663			8,354		105,872
Rental equipment, at cost (period end)		775,400			262,325			309,808		—			1,347,533
Rental equipment, net book value (period end)		543,857			109,482			208,981		—			862,320
Utilization (period end) 2		77.8	%		61.7	%		57.5	%
Average utilization 2		76.8	%		62.9	%		56.0	%

1	Gross Enviroplex sales revenues were $39,814, $30,407 and $31,369 in 2019, 2018 and 2017, respectively. There were $1,361 inter-segment sales to Mobile Modular in 2018, which have been eliminated in consolidation. There were no inter-segment sales in 2019 and 2017.

2	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.

No single customer accounted for more than 10% of total revenues during 2019, 2018 and 2017. Revenue from foreign country customers accounted for 5%, 4% and 4% of the Company’s revenues for the same periods, respectively.