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Discontinued Operations | 3 Months Ended
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Mar. 31, 2023
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 $264.5 million. 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 and 2022:
(dollar amounts in thousands) |  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |
Revenues |  |  |  |  |  |
Rental |  | $ | 6,520 |  |  | $ | 14,191 |
Rental related services |  |  | 2,584 |  |  |  | 5,285 |
Rental operations |  |  | 9,104 |  |  |  | 19,476 |
Sales |  |  | 269 |  |  |  | 657 |
Other |  |  | 65 |  |  |  | 187 |
Total revenues |  |  | 9,438 |  |  |  | 20,320 |
Costs and Expenses |  |  |  |  |  |
Direct costs of rental operations: |  |  |  |  |  |
Depreciation of rental equipment |  |  | 1,325 |  |  |  | 4,012 |
Rental related services |  |  | 2,020 |  |  |  | 4,383 |
Other |  |  | 1,270 |  |  |  | 2,969 |
Total direct costs of rental operations |  |  | 4,614 |  |  |  | 11,364 |
Costs of sales |  |  | 159 |  |  |  | 502 |
Total costs of revenues |  |  | 4,773 |  |  |  | 11,866 |
Gross Profit |  |  |  |  |  |
Rental |  |  | 3,926 |  |  |  | 7,210 |
Rental related services |  |  | 564 |  |  |  | 902 |
Rental operations |  |  | 4,490 |  |  |  | 8,112 |
Sales |  |  | 110 |  |  |  | 155 |
Other |  |  | 65 |  |  |  | 187 |
Total gross profit |  |  | 4,665 |  |  |  | 8,454 |
Selling and administrative expenses |  |  | 2,582 |  |  |  | 6,522 |
Operating income |  |  | 2,083 |  |  |  | 1,932 |
Interest expense allocation |  |  | (374 | ) |  |  | (544 | )
Income from discontinued operations before provision for income taxes |  |  | 1,709 |  |  |  | 1,388 |
Provision for income taxes from discontinued operations |  |  | 453 |  |  |  | 273 |
Income from discontinued operations |  | $ | 1,256 |  |  | $ | 1,115 |
Other Selected Information |  |  |  |  |  |
Adjusted EBITDA |  | $ | 3,682 |  |  | $ | 6,707 |
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 condensed consolidated balance sheets as of December 31, 2022:
|  |  |  | 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 and 2022, significant operating and investing items related to Adler Tanks were as follows:
|  | March 31, |  |  | March 31, |
(in thousands) |  | 2023 |  |  | 2022 |
Operating activities of discontinued operations: |  |  |  |  |  |
Depreciation and amortization |  | $ | 1,457 |  |  | $ | 4,450 |
Gain on sale of used rental equipment |  |  | (111 | ) |  |  | (155 | )
Investing activities of discontinued operations: |  |  |  |  |  |
Proceeds from sales of used rental equipment |  |  | 269 |  |  |  | 657 |
Purchases of rental equipment |  |  | (25 | ) |  |  | (108 | )
Purchases of property, plant and equipment |  |  | (40 | ) |  |  | (12 | )
The following table presents the reconciliation of income from discontinued operations to Adjusted EBITDA for the three months ended March 31, 2023 and 2022:
|  | March 31, |  |  | March 31, |
(in thousands) |  | 2023 |  |  | 2022 |
Income from discontinued operations |  | $ | 1,256 |  |  | $ | 1,115 |
Provision for income taxes from discontinued operations |  |  | 453 |  |  |  | 273 |
Interest expense |  |  | 374 |  |  |  | 544 |
Depreciation and amortization |  |  | 1,457 |  |  |  | 4,450 |
EBITDA |  |  | 3,540 |  |  |  | 6,382 |
Share-based compensation |  |  | 118 |  |  |  | 248 |
Transaction costs |  |  | 24 |  |  |  | — |
Adjusted EBITDA from discontinued operations |  | $ | 3,682 |  |  | $ | 6,630 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI https://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 + Details
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