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Significant Accounting Policies
6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Significant Accounting Policies

(2) Significant Accounting Policies

We describe our significant accounting policies in Note 2 of the notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022. During the three and six months ended June 30, 2023, there were no significant changes to those accounting policies.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less.

Use of Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. These assumptions and estimates could have a material effect on our condensed consolidated financial statements. Actual results may differ materially from those estimates. We review our estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause us to revise these estimates.

Revenue Recognition

We recognize revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842.

Under Topic 606, Revenue from Contracts with Customers, revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenue is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. Our contracts with customers generally do not include multiple performance obligations. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services.

Under Topic 842, Leases, we account for equipment rental contracts as operating leases. We recognize revenue from equipment rentals in the period earned, regardless of the timing of billing to customers. A rental contract includes rates for daily, weekly or monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can extend across multiple reporting periods, we record unbilled rental revenues and deferred rental revenues at the end of reporting periods so rental revenues earned is appropriately stated for the periods presented.

In the table below, revenues as presented in our condensed consolidated statements of income for the three and six months ended June 30, 2023 and 2022 are summarized by type and by the applicable accounting standard.

 

 

 

Three Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned equipment rentals

 

$

250,718

 

 

$

113

 

 

$

250,831

 

 

$

193,704

 

 

$

77

 

 

$

193,781

 

Re-rent revenue

 

 

7,892

 

 

 

 

 

 

7,892

 

 

 

7,462

 

 

 

 

 

 

7,462

 

Ancillary and other rental revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivery and pick-up

 

 

 

 

 

17,674

 

 

 

17,674

 

 

 

 

 

 

13,899

 

 

 

13,899

 

Other

 

 

15,062

 

 

 

 

 

 

15,062

 

 

 

12,435

 

 

 

 

 

 

12,435

 

Total ancillary rental revenues

 

 

15,062

 

 

 

17,674

 

 

 

32,736

 

 

 

12,435

 

 

 

13,899

 

 

 

26,334

 

Total equipment rental revenues

 

 

273,672

 

 

 

17,787

 

 

 

291,459

 

 

 

213,601

 

 

 

13,976

 

 

 

227,577

 

Used equipment sales

 

 

 

 

 

39,653

 

 

 

39,653

 

 

 

 

 

 

18,833

 

 

 

18,833

 

New equipment sales

 

 

 

 

 

8,857

 

 

 

8,857

 

 

 

 

 

 

21,486

 

 

 

21,486

 

Parts sales

 

 

 

 

 

12,028

 

 

 

12,028

 

 

 

 

 

 

16,172

 

 

 

16,172

 

Service revenues

 

 

 

 

 

7,133

 

 

 

7,133

 

 

 

 

 

 

8,889

 

 

 

8,889

 

Other

 

 

 

 

 

1,102

 

 

 

1,102

 

 

 

 

 

 

1,714

 

 

 

1,714

 

Total revenues

 

$

273,672

 

 

$

86,560

 

 

$

360,232

 

 

$

213,601

 

 

$

81,070

 

 

$

294,671

 

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

 

Topic 842

 

 

Topic 606

 

 

Total

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owned equipment rentals

 

$

474,298

 

 

$

250

 

 

$

474,548

 

 

$

364,433

 

 

$

186

 

 

$

364,619

 

Re-rent revenue

 

 

16,251

 

 

 

 

 

 

16,251

 

 

 

13,806

 

 

 

 

 

 

13,806

 

Ancillary and other rental revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivery and pick-up

 

 

 

 

 

33,165

 

 

 

33,165

 

 

 

 

 

 

24,999

 

 

 

24,999

 

Other

 

 

29,503

 

 

 

 

 

 

29,503

 

 

 

23,378

 

 

 

 

 

 

23,378

 

Total ancillary rental revenues

 

 

29,503

 

 

 

33,165

 

 

 

62,668

 

 

 

23,378

 

 

 

24,999

 

 

 

48,377

 

Total equipment rental revenues

 

 

520,052

 

 

 

33,415

 

 

 

553,467

 

 

 

401,617

 

 

 

25,185

 

 

 

426,802

 

Used equipment sales

 

 

 

 

 

71,768

 

 

 

71,768

 

 

 

 

 

 

40,359

 

 

 

40,359

 

New equipment sales

 

 

 

 

 

16,675

 

 

 

16,675

 

 

 

 

 

 

47,522

 

 

 

47,522

 

Parts sales

 

 

 

 

 

24,185

 

 

 

24,185

 

 

 

 

 

 

32,231

 

 

 

32,231

 

Service revenues

 

 

 

 

 

14,319

 

 

 

14,319

 

 

 

 

 

 

17,023

 

 

 

17,023

 

Other

 

 

 

 

 

2,300

 

 

 

2,300

 

 

 

 

 

 

3,184

 

 

 

3,184

 

Total revenues

 

$

520,052

 

 

$

162,662

 

 

$

682,714

 

 

$

401,617

 

 

$

165,504

 

 

$

567,121

 

 

Revenues by reporting segment are presented in Note 11 of our Condensed Consolidated Financial Statements, using the revenue captions reflected in our Consolidated Statements of Income. We believe that the disaggregation of our revenues from contracts to customers as reflected above, coupled with further discussion below and the reporting segments in Note 11, depict how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. For further information related to our accounting for revenues pursuant to Topic 606 and Topic 842, see Significant Accounting Policies in Note 2 to our Annual Report on Form 10-K for the year ended December 31, 2022.

Receivables and contract assets and liabilities

We manage credit risk associated with our accounts receivables at the customer level. Because the same customers typically generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and our allowance for doubtful accounts address our total revenues from Topic 606 and Topic 842.

We believe concentration of credit risk with respect to our receivables is limited because our customer base is comprised of a large number of geographically diverse customers. No single customer accounted for more than 10% of our revenues on an overall or segment basis for any of the periods presented in this Quarterly Report on Form 10-Q. We manage credit risk through credit approvals, credit limits and other monitoring procedures.

Pursuant to Topic 842 and Topic 326 for rental and non-rental receivables, respectively, we maintain an allowance for doubtful accounts that reflects our estimate of our expected credit losses. Our allowance is estimated using a loss rate model based on delinquency. The estimated loss rate is based on our historical experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable forecasts, and our own judgment as to the likelihood of ultimate payment based upon available data. Our largest exposure to doubtful accounts is our rental operations, which as discussed above is accounted for under Topic 842 and as of June 30, 2023 represents 81.1% of our total revenues and an approximate corresponding percentage of our receivables, net and associated allowance for doubtful accounts. We perform credit evaluations of customers and establish credit limits based on reviews of our customers’ current credit information and payment histories. We believe our credit risk is somewhat mitigated by our geographically diverse customer base and our credit evaluation procedures. The actual rate of future credit losses, however, may not be similar to past experience. Our estimate of doubtful accounts could change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowance for doubtful accounts. Bad debt expense as a percentage of total revenues for both the six months ended June 30, 2023 and 2022 were approximately 0.3%.

We do not have material contract assets, impairment losses associated therewith, or material contract liabilities associated with contracts with customers. Our contracts with customers do not generally result in material amounts billed to customers in excess of recognizable revenue. We did not recognize material revenues during the three months ended June 30, 2023 and 2022 that was included in the contract liability balance as of the beginning of such periods.

Goodwill

The change to the carrying amount of goodwill for the period ended June 30, 2023 is as follows (amounts in thousands):

 

 

Equipment Rentals

 

 

Used Eq. Sales

 

 

New Eq. Sales

 

 

Parts Sales

 

 

Service Revenues

 

 

Total

 

Balance at December 31, 2021 (1)

 

$

48,976

 

 

$

8,447

 

 

$

 

 

$

5,714

 

 

$

 

 

$

63,137

 

Increase (2)

 

 

39,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,553

 

Balance at December 31, 2022 (1)

 

 

88,529

 

 

 

8,447

 

 

 

 

 

 

5,714

 

 

 

 

 

 

102,690

 

Increase (3)

 

 

29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Balance at June 30, 2023 (1)

 

$

88,558

 

 

$

8,447

 

 

$

 

 

$

5,714

 

 

$

 

 

$

102,719

 

(1)
The total carrying amount of goodwill as of December 31, 2021, December 31, 2022 and June 30, 2023 in the table above is reflected net of $92.7 million of accumulated impairment charges.
(2)
Increase due to the OSR Acquisition.
(3)
Increase is related to the closing adjustments of the OSR Acquisition during the first quarter of 2023.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

On January 1, 2023 we adopted Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provided optional guidance for a limited time to ease the potential burden in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the

London Interbank Offered Rate (“LIBOR”) on financial reporting. Our exposure related to the expected cessation of LIBOR was limited to the interest expense and certain fees we incur on balances outstanding under our Senior Secured Credit Facility (the “Credit Facility”). We amended and restated our Credit Facility to transition to Secured Overnight Financing Rate (“SOFR”) as of February 2, 2023. The impact from the cessation of LIBOR as a reference rate did not have a material impact on our consolidated financial statements.