NOTE 5. SEGMENT REPORTING

The Company’s four reportable segments are (1) its modular building and portable storage segment (“Mobile Modular”); (2) its electronic test equipment segment (“TRS-RenTelco”); (3) its containment solutions for the storage of hazardous and non-hazardous liquids and solids segment (“Adler Tanks”); and (4) its classroom manufacturing segment selling modular buildings used primarily as classrooms in California (“Enviroplex”). The operations of each of these segments are described in Part I – Item 1, “Business,” and the accounting policies of the segments are described in “Note 2 – Significant Accounting Policies” in the Company’s annual report on Form 10-K for the year ended December 31, 2016. Management focuses on several key measures to evaluate and assess each segment’s performance, including rental revenue growth, gross profit, income from operations 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 among Mobile Modular, TRS-RenTelco and Adler Tanks based on their pro-rata share of average rental equipment at cost, 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 nine months ended September 30, 2017 and 2016 for the Company’s reportable segments is shown in the following table:

(dollar amounts in thousands)	Mobile Modular			TRS- RenTelco			Adler Tanks			Enviroplex ¹		Consolidated
Nine Months Ended September 30,
2017
Rental revenues	$	104,923		$	60,569		$	46,220		$ —		$	211,712
Rental related services revenues		38,283			2,095			18,209		—			58,587
Sales and other revenues		30,622			16,493			1,701			20,692		69,508
Total revenues		173,828			79,157			66,130			20,692		339,807
Depreciation of rental equipment		15,951			24,335			11,827		—			52,113
Gross profit		77,939			36,420			31,407			5,890		151,656
Selling and administrative expenses		42,157			16,475			21,855			3,215		83,702
Income from operations		35,782			19,945			9,552			2,675		67,954
Interest (expense) income allocation		(5,008	)		(1,726	)		(2,301	)		311		(8,724	)
Income before provision for income taxes		30,774			18,492			7,251			2,986		59,503
Rental equipment acquisitions		28,107			45,700			3,130		—			76,937
Accounts receivable, net (period end)		66,126			16,253			18,118			6,916		107,413
Rental equipment, at cost (period end)		781,791			258,877			309,825		—			1,350,493
Rental equipment, net book value (period end)		547,115			106,728			211,881		—			865,724
Utilization (period end) ²		76.8	%		64.3	%		59.7	%
Average utilization ²		76.6	%		62.8	%		54.7	%
2016
Rental revenues	$	96,002		$	61,562		$	43,472		$ —		$	201,036
Rental related services revenues		37,034			2,156			17,838		—			57,028
Sales and other revenues		25,416			18,491			1,039			15,787		60,733
Total revenues		158,452			82,209			62,349			15,787		318,797
Depreciation of rental equipment		15,642			26,939			12,009		—			54,590
Gross profit		67,329			34,033			28,362			5,120		134,844
Selling and administrative expenses		38,162			16,444			20,786			2,889		78,281
Income from operations		29,167			17,589			7,576			2,231		56,563
Interest (expense) income allocation		(5,264	)		(1,921	)		(2,487	)		186		(9,486	)
Income before provision for income taxes		23,903			15,727			5,089			2,417		47,136
Rental equipment acquisitions		35,363			24,991			404		—			60,758
Accounts receivable, net (period end)		63,752			20,267			15,922			4,063		104,004
Rental equipment, at cost (period end)		763,777			252,573			308,852		—			1,325,202
Rental equipment, net book value (period end)		543,141			93,894			225,493		—			862,528
Utilization (period end) ²		77.6	%		62.4	%		52.1	%
Average utilization ²		76.3	%		60.1	%		49.9	%

1.	Gross Enviroplex sales revenues were $20,692 and $15,872 for the nine months ended September 30, 2017 and 2016, respectively, with no intercompany sales to Mobile Modular in 2017 and $85 inter-segment sales to Mobile Modular in 2016, which were eliminated in consolidation.

Utilization is calculated each month by dividing the cost of rental equipment on rent by the total cost of rental equipment excluding accessory equipment and for Mobile Modular and Adler Tanks excluding new equipment inventory. 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 for the nine months ended September 30, 2017 and 2016. Revenues from foreign country customers accounted for 4% and 5% of the Company’s total revenues for the 2017 and 2016 periods, respectively.