Discontinued Operations

3 Months Ended

Mar. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE 5. DISCONTINUED OPERATIONS

On February 1, 2023, the Company completed the sale of Adler Tank Rentals, LLC to Ironclad Environmental Solutions, Inc. ("Ironclad"), a portfolio company of Kinderhook Industries, for a sale price of $268.0 million. The total transaction costs incurred from the divestiture were $8.8 million, with $6.7 million and $2.1 million incurred during the years ended December 31, 2023 and 2022, respectively. The divestiture of the Company's Adler Tanks business represents the Company's strategic shift to concentrate its operations on its core modular and storage businesses. The sale price was subject to certain adjustments, including net working capital, certain qualified capital expenditures and certain transaction expenses to be borne by the Company. In connection with the sale, the Company entered into a number of ancillary agreements, including an escrow agreement associated with net working capital adjustments, a restricted covenant agreement, a transition services agreement, and a number of leases whereby Ironclad or one of its affiliates would be a lessee to certain properties owned by the Company that the Adler Tanks business would continue to utilize after the sale. These ancillary agreements do not provide for continued involvement by the Company in Adler Tanks. In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations and ASC 360, Property, Plant and Equipment, the Company determined that the criteria for the presentation of discontinued operations and held-for-sale, respectively, were met during the first quarter of 2023.

The following table presents the results of Adler Tanks as reported in income from discontinued operations within the condensed consolidated statements of income for the three months ended March 31, 2023:

(dollar amounts in thousands)	Three Months Ended March 31,
	2023
Revenues
Rental	$	6,520
Rental related services		2,584
Rental operations		9,104
Sales		269
Other		65
Total revenues		9,438
Costs and Expenses
Direct costs of rental operations:
Depreciation of rental equipment		1,325
Rental related services		2,020
Other		1,270
Total direct costs of rental operations		4,614
Costs of sales		159
Total costs of revenues		4,773
Gross Profit
Rental		3,926
Rental related services		564
Rental operations		4,490
Sales		110
Other		65
Total gross profit		4,665
Selling and administrative expenses		2,582
Operating income		2,083
Interest expense allocation		(374	)
Income from discontinued operations before provision for income taxes		1,709
Provision for income taxes from discontinued operations		453
Income from discontinued operations	$	1,256

The following table presents the carrying value of the divested business' assets and liabilities as presented within assets and liabilities of discontinued operations on the consolidated balance sheets as of December 31, 2022, which was the most recently audited period prior to divestiture:

	December 31,
(in thousands)	2022
Assets
Accounts receivable, net of allowance for credit losses of $450	$	20,086
Rental equipment, net		137,738
Property, plant and equipment, net		6,632
Prepaid expenses and other assets		191
Intangible assets, net		5,700
Goodwill		25,902
Total assets of discontinued operations	$	196,249
Liabilities
Accounts payable and accrued liabilities	$	9,621
Deferred income taxes, net		43,550
Total liabilities of discontinued operations	$	53,171

For the three months ended March 31, 2023, significant operating and investing items related to Adler Tanks were as follows:

	March 31,
(in thousands)	2023
Operating activities of discontinued operations:
Depreciation and amortization	$	1,457
Gain on sale of used rental equipment		(111	)
Investing activities of discontinued operations:
Proceeds from sales of used rental equipment		269
Purchases of rental equipment		(25	)
Purchases of property, plant and equipment		(40	)

The following table presents the reconciliation of income from discontinued operations to Adjusted EBITDA for the three months ended March 31, 2023:

	March 31,
(in thousands)	2023
Income from discontinued operations	$	1,256
Provision for income taxes from discontinued operations		453
Interest expense		374
Depreciation and amortization		1,457
EBITDA		3,540
Share-based compensation		118
Transaction costs		24
Adjusted EBITDA from discontinued operations	$	3,682