Segment Reporting

9 Months Ended

Sep. 30, 2019

NOTE 8. 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 2018 Annual Report. 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, 2019 and 2018 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,
2019
Rental revenues	$	133,736		$	76,050		$	51,872		$ —		$	261,658
Rental related services revenues		52,946			2,425			21,367		—			76,738
Sales and other revenues		32,434			18,601			1,340			32,238		84,613
Total revenues		219,116			97,076			74,579			32,238		423,009
Depreciation of rental equipment		16,449			30,533			12,240		—			59,222
Gross profit		102,029			44,673			36,380			12,086		195,168
Selling and administrative expenses		48,013			18,101			22,054			3,876		92,044
Income from operations		54,016			26,572			14,326			8,210		103,124
Interest (expense) income allocation		(5,948	)		(1,662	)		(2,598	)		801		(9,407	)
Income before provision for income taxes		48,068			24,864			11,728			9,011		93,671
Rental equipment acquisitions		62,084			66,525			3,884		—			132,493
Accounts receivable, net (period end)		88,893			22,515			19,382			7,324		138,114
Rental equipment, at cost (period end)		865,254			321,677			315,838		—			1,502,769
Rental equipment, net book value (period end)		607,949			162,196			188,465		—			958,610
Utilization (period end) ²		79.5	%		67.1	%		51.0	%
Average utilization ²		79.1	%		66.0	%		56.2	%

2018
Rental revenues	$	116,436		$	65,919		$	51,328		$ —		$	233,683
Rental related services revenues		40,510			2,287			18,000		—			60,797
Sales and other revenues		31,667			18,321			916			19,831		70,735
Total revenues		188,613			86,527			70,244			19,831		365,215
Depreciation of rental equipment		15,841			26,536			11,910		—			54,287
Gross profit		86,515			40,155			35,031			6,447		168,148
Selling and administrative expenses		43,191			16,780			22,245			3,617		85,833
Income from operations		43,324			23,375			12,786			2,830		82,315
Interest (expense) income allocation		(5,256	)		(1,999	)		(2,409	)		531		(9,133	)
Income before provision for income taxes		38,068			20,871			10,377			3,361		72,677
Rental equipment acquisitions		40,704			51,744			3,187		—			95,635
Accounts receivable, net (period end)		69,419			18,991			19,876			6,803		115,089
Rental equipment, at cost (period end)		801,129			284,647			312,487		—			1,398,263
Rental equipment, net book value (period end)		558,790			129,816			200,001		—			888,607
Utilization (period end) ²		79.2	%		61.5	%		64.0	%
Average utilization ²		77.8	%		62.4	%		59.8	%

Gross Enviroplex sales revenues were $32,238 and $21,191 for the nine months ended September 30, 2019 and 2018, respectively. There were $1,360 inter-segment sales to Mobile Modular in the nine months ended September 30, 2018, which required elimination in consolidation. There were no inter-segment sales in the nine months ended September 30, 2019.

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, 2019 and 2018. Revenues from foreign country customers accounted for 3% and 4% of the Company’s total revenues for the same periods, respectively.