Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2014 |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
Basis of Presentation |
The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. |
Unless otherwise indicated, references to “FY 2013” and “FY 2014” are to the fiscal years ended June 30, 2013 and 2014, respectively. |
Certain reclassifications have been made to the FY 2013 presentation, the most significant being a revised segment presentation in Note 12. |
Principles of Consolidation | ' |
Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
Foreign Currency Translation | ' |
Foreign Currency Translation |
The Company’s functional currencies for its foreign operations are the respective local currencies, the Australian (“AUS”) and New Zealand (“NZ”) dollars in the Asia-Pacific area and the Canadian (“C”) dollar in North America. All adjustments resulting from the translation of the accompanying consolidated financial statements from the functional currency into reporting currency are recorded as a component of stockholders’ equity in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830, Foreign Currency Matters. All assets and liabilities are translated at the rates in effect at the balance sheet dates; and revenues, expenses, gains and losses are translated using the average exchange rates during the periods. Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate prevailing at that date. Foreign exchange differences arising on translation are recognized in the statement of operations. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates prevailing at the dates the fair value was determined. |
Segment Information | ' |
Segment Information |
FASB ASC Topic 280, Segment Reporting, establishes standards for the way companies report information about operating segments in annual financial statements. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Based on the provisions of FASB ASC Topic 280 and the manner in which the chief operating decision maker analyzes the business, the Company has determined it has two separately reportable geographic areas that include four operating segments, North America (leasing and manufacturing, including corporate headquarters) and the Asia-Pacific area (the leasing operations of Royal Wolf). |
Use of Estimates | ' |
Use of Estimates |
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes include assumptions used in assigning value to identifiable intangible assets at the acquisition date, the assessment for impairment of goodwill, the assessment for impairment of other intangible assets, the allowance for doubtful accounts, share-based compensation expense, residual value of the lease fleet and deferred tax assets and liabilities. Assumptions and factors used in the estimates are evaluated on an annual basis or whenever events or changes in circumstances indicate that the previous assumptions and factors have changed. The results of the analysis could result in adjustments to estimates. |
Cash Equivalents | ' |
Cash Equivalents |
The Company considers highly liquid investments with maturities of three months or less, when purchased, to be cash equivalents. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on its cash balances. |
Inventories | ' |
Inventories |
Inventories are stated at the lower of cost or fair value (net realizable value) and consist of primarily finished goods for containers, modular buildings and mobile offices held for sale or lease; as well as raw materials, work in-process and finished goods of manufactured portable liquid storage tank containers. Costs for leasing operations are assigned to individual items on the basis of specific identification and include expenditures incurred in acquiring the inventories and bringing them to their existing condition and location; while costs for manufactured units are determined using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business. Expenses of marketing, selling and distribution to customers, as well as costs of completion, are estimated and are deducted from the estimated selling price to establish net realizable value. Inventories are comprised of the following (in thousands): |
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| | June 30, | | | | | |
| | 2013 | | | 2014 | | | | | |
Finished goods | | $ | 27,357 | | | $ | 24,157 | | | | | |
Work in-process | | | 1,680 | | | | 2,011 | | | | | |
Raw materials | | | 2,821 | | | | 1,234 | | | | | |
| | | | | | | | | | | | |
| | $ | 31,858 | | | $ | 27,402 | | | | | |
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Derivative Financial Instruments | ' |
Derivative Financial Instruments |
The Company may use derivative financial instruments to hedge its exposure to foreign currency and interest rate risks arising from operating, financing and investing activities. The Company does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognized initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on the remeasurement to fair value on unhedged (or the ineffective portion of hedged) derivative financial instruments is recognized in the statement of operations. |
Accounting for Stock Options | ' |
Accounting for Stock Options |
For the issuances of stock options, the Company follows the fair value provisions of FASB ASC Topic 718, Stock Compensation, which require recognition of employee share-based compensation expense in the statements of operations over the vesting period based on the fair value of the stock option at the grant date. For stock options granted to non-employee consultants, the Company recognizes compensation expense measured at their fair value at each reporting date. Therefore, the stock options issued to non-employee consultants are subject to periodic fair value adjustments recorded in share-based compensation over the vesting period. |
Fair Value | ' |
Fair Value |
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 6. Fair value estimates would involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates |
Property, Plant and Equipment | ' |
Property, Plant and Equipment |
Owned assets |
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labor, the initial estimate (where relevant) of the costs of dismantling and removing the items and restoring the site on which they are located; and an appropriate allocation of production overhead, where applicable. Depreciation for property, plant and equipment is recorded on the straight-line basis over the estimated useful lives of the related asset. The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually. |
Property, plant and equipment consist of the following (in thousands): |
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| | | | | | | | | | | | |
| | Estimated | | | June 30, | |
| | Useful Life | | 2013 | | | 2014 | |
Land | | | — | | | $ | 2,181 | | | $ | 2,423 | |
Building and improvements | | | 10 — 40 years | | | | 3,943 | | | | 4,608 | |
Transportation and plant equipment (including capital lease assets) | | | 3 — 20 years | | | | 22,605 | | | | 34,934 | |
Furniture, fixtures and office equipment | | | 3 — 10 years | | | | 5,142 | | | | 7,286 | |
Construction in-process | | | | | | | 87 | | | | 134 | |
| | | | | | | | | | | | |
| | | | | | | 33,958 | | | | 49,385 | |
Less accumulated depreciation and amortization | | | | | | | (14,118 | ) | | | (18,771 | ) |
| | | | | | | | | | | | |
| | | | | | $ | 19,840 | | | $ | 30,614 | |
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Capital leases |
Leases under which substantially all the risks and benefits incidental to ownership of the leased assets are assumed by the Company are classified as capital leases. Other leases are classified as operating leases. A lease asset and a lease liability equal to the present value of the minimum lease payments, or the fair value of the leased item, whichever is the lower, are capitalized and recorded at the inception of the lease. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of operations. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. |
Operating leases |
Payments made under operating leases are expensed on the straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property. Where leases have fixed rate increases, these increases are accrued and amortized over the entire lease period, yielding a constant periodic expense over the term of the lease. |
Lease Fleet | ' |
Lease Fleet |
The Company has a fleet of storage, portable building, office and portable liquid storage tank containers, mobile offices, modular buildings and steps that it primarily leases to customers under operating lease agreements with varying terms. The value of the lease fleet (or lease or rental equipment) is recorded at cost and depreciated on the straight-line basis over the estimated useful life (5 - 20 years), after the date the units are put in service, down to their estimated residual values (up to 70% of cost). In the opinion of management, estimated residual values are at or below net realizable values. The Company periodically reviews these depreciation policies in light of various factors, including the practices of the larger competitors in the industry, and its own historical experience. Costs incurred on lease fleet units subsequent to initial acquisition are capitalized when it is probable that future economic benefits in excess of the originally assessed performance will result; otherwise, they are expensed as incurred. At June 30, 2013 and 2014, the gross costs of the lease fleet were $332,435,000 and $453,362,000, respectively. |
Units in the lease fleet are also available for sale. The cost of sales of a unit in the lease fleet is recognized at the carrying amount at the date of sale. |
Impairment of Long-Lived Assets | ' |
Impairment of Long-Lived Assets |
The Company periodically reviews for the impairment of long-lived assets and assesses when an event or change in circumstances indicates the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and the eventual disposition is less than its carrying amount. The Company has determined that no impairment provision related to long-lived assets was required to be recorded as of June 30, 2013 and 2014. |
Goodwill | ' |
Goodwill |
The purchase consideration of acquired businesses have been allocated to the assets and liabilities acquired based on the estimated fair values on the respective acquisition dates (see Note 4). Based on these values, the excess purchase consideration over the fair value of the net assets acquired was allocated to goodwill. The Company accounts for goodwill in accordance with FASB ASC Topic 350, Intangibles — Goodwill and Other. FASB ASC Topic 350 prohibits the amortization of goodwill and intangible assets with indefinite lives and requires these assets be reviewed for impairment. Goodwill recorded from acquisitions of businesses under asset purchase agreements is deductible for income tax purposes over 15 years, even though goodwill is not amortized for financial reporting purposes. The Company operates two reportable geographic areas and the vast majority of goodwill recorded was in the acquisitions of Royal Wolf, Pac-Van, Southern Frac and Lone Star. The Company performed an annual impairment test on goodwill at year end using the two-step process required under FASB ASC Topic 350. The first step was a screen for potential impairment, while the second step measured the amount of the impairment, if any, by determining the implied fair value of a reporting unit’s goodwill and comparing it to the carrying value of the goodwill. This would involve allocating the fair value of the reporting unit to its respective assets and liabilities (as if it had been acquired in a separate and individual business combination and the fair value was the price paid to acquire it), with the excess of the fair value over the amounts assigned being the implied fair value of goodwill. |
Effective July 1, 2012, the Company adopted the new qualitative assessment now allowable under ASC Topic 350. It will no longer be required for the Company to calculate the fair value of a reporting unit unless a determination is made based on a qualitative assessment that it is more likely than not (i.e., greater than 50%) that the fair value of the reporting unit is less than its carrying amount. Qualitative factors which could cause an impairment include (1) significant underperformance relative to historical, expected or projected future operating results; (2) significant changes in the manner of use of the acquired businesses or the strategy for our overall business; (3) significant changes during the period in the Company’s market capitalization relative to net book value; and (4) significant negative industry or general economic trends. If the Company did determine that fair value is likely less than the carrying amount, the quantitative two-step impairment test process discussed above would be applied. As of June 30, 2013 and 2014, the Company determined that it was not likely that the fair values of the goodwill of its operating units were less than their respective carrying amounts. |
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The change in the balance of goodwill was as follows (in thousands): |
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| | | | | | | | | | | | |
| | June 30, | | | | | |
| | 2013 | | | 2014 | | | | | |
Beginning of year | | $ | 68,449 | | | $ | 68,692 | | | | | |
Additions to goodwill | | | 3,790 | | | | 23,608 | | | | | |
Other adjustments, primarily foreign translation effect (a) | | | (3,547 | ) | | | 866 | | | | | |
Impairment of goodwill | | | — | | | | — | | | | | |
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End of year | | $ | 68,692 | | | $ | 93,166 | | | | | |
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(a) | Includes a $70 adjustment in FY 2014 to reduce the goodwill recorded from the acquisition of Southern Frac in FY 2013 as a result of pre-acquisition claims subsequent to June 30, 2013 that reduced the seller’s holdback note. | | | | | | | | | | | |
Intangible Assets | ' |
Intangible Assets |
Intangible assets include those with indefinite (trademark and trade name) and finite (primarily customer base and lists, non-compete agreements and deferred financing costs) useful lives. Customer base and lists and non-compete agreements are amortized on the straight-line basis over the expected period of benefit which range from one to fourteen years. Costs to obtaining long-term financing are deferred and amortized over the term of the related debt using the straight-line method. Amortizing the deferred financing costs using the straight-line method does not produce significantly different results than that of the effective interest method. |
Intangible assets consist of the following (in thousands): |
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| | | | | | | | | | | | |
| | June 30, | | | | | |
| | 2013 | | | 2014 | | | | | |
Trademark and trade name | | $ | 2,928 | | | $ | 5,427 | | | | | |
Customer base and lists | | | 30,540 | | | | 50,735 | | | | | |
Non-compete agreements | | | 7,523 | | | | 13,611 | | | | | |
Deferred financing costs | | | 1,991 | | | | 7,080 | | | | | |
Other | | | 1,605 | | | | 1,951 | | | | | |
| | | | | | | | | | | | |
| | | 44,587 | | | | 78,804 | | | | | |
Less accumulated amortization | | | (28,185 | ) | | | (35,288 | ) | | | | |
| | | | | | | | | | | | |
| | $ | 16,402 | | | $ | 43,516 | | | | | |
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The Company reviews intangible assets (those assets resulting from acquisitions) for impairment if it determines, based on a qualitative assessment, that it is more likely than not (i.e., greater than 50%) that fair value might be less than the carrying amount. If the Company determines that fair value is more likely than not less than the carrying amount, then impairment would be quantitatively tested, using historical cash flows and other relevant facts and circumstances as the primary basis for estimates of future cash flows. If it determines that fair value is not likely to be less than the carrying amount, then no further testing would be required. As of June 30, 2013 and 2014, the Company determined that it was not likely that the fair values of intangible assets were less than the carrying amounts. |
The estimated future amortization of intangible assets with finite useful lives as of June 30, 2014 is as follows (in thousands): |
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Year Ending June 30, | | | | | | | | | | | |
2015 | | $ | 8,774 | | | | | | | | | |
2016 | | | 8,850 | | | | | | | | | |
2017 | | | 6,938 | | | | | | | | | |
2018 | | | 3,626 | | | | | | | | | |
2019 | | | 2,463 | | | | | | | | | |
Thereafter | | | 7,438 | | | | | | | | | |
| | | | | | | | | | | | |
| | $ | 38,089 | | | | | | | | | |
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Defined Contribution Benefit Plan | ' |
Defined Contribution Benefit Plan |
Obligations for contributions to defined contribution benefit plans are recognized as an expense in the statement of operations as incurred. Contributions to defined contribution benefit plans in FY 2013 and FY 2014 were $1,582,000 and $1,638,000, respectively. |
Revenue Recognition | ' |
Revenue Recognition |
The Company leases and sells new and used storage, office, building and portable liquid storage tank containers, modular buildings and mobile offices to its customers, as well as providing other ancillary products and services. Leases to customers generally qualify as operating leases unless there is a bargain purchase option at the end of the lease term. Revenue is recognized as earned in accordance with the lease terms established by the lease agreements and when collectability is reasonably assured. |
Revenue from sales of the lease fleet is generally recognized upon delivery and when collectability is reasonably assured and revenue from the sales of manufactured units are recognized when title and risk of loss transfers to the purchaser, generally upon shipment. Certain arrangements to sell units under long-term construction-type sales contracts are accounted for under the percentage of completion method. Under this method, income is recognized in proportion to the incurred costs to date under the contract to estimated total costs. |
Unearned revenue includes end of lease services not yet performed by the Company (such as transport charges for the pick-up of a unit where the actual pick-up has not yet occurred as the unit is still leased), advance rentals and deposit payments. |
Advertising | ' |
Advertising |
Advertising costs are generally expensed as incurred. Direct-response advertising costs, principally yellow page advertising, are monitored through call logs and advertising source codes, are capitalized when paid and amortized over the period in which the benefit is derived. However, the amortization period of the prepaid balance never exceeds 12 months. At June 30, 2014, prepaid advertising costs were approximately $35,000. There were no prepaid adverting costs at June 30, 2013. Advertising costs expensed were approximately $3,646,000 and $3,164,000 for FY 2013 and FY 2014, respectively. |
Shipping and Handling Costs | ' |
Shipping and Handling Costs |
The Company reports shipping and handling costs, primarily related to outbound freight in its North American manufacturing operations, as a component of selling and general expenses. Shipping and handling costs totaled $502,000 and $1,244,000 in FY 2013 and FY 2014, respectively. |
Income Taxes | ' |
Income Taxes |
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for temporary differences between the financial reporting basis and income tax basis of assets and liabilities at the balance sheet date multiplied by the applicable tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period. The Company files U.S. Federal tax returns, multiple U.S. state (and state franchise) tax returns and Australian, New Zealand and Canadian tax returns. For U.S. Federal tax purposes, all periods subsequent to June 30, 2008 are subject to examination by the U.S. Internal Revenue Service (“IRS”) and, for U.S. state tax purposes, with few exceptions, all periods subsequent to June 30, 2007 are subject to examination by the respective state’s taxation authorities. Generally, periods subsequent to June 30, 2008 are subject to examination by the respective taxation authorities in Australia, New Zealand and Canada. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change. Therefore, no reserves for uncertain income tax positions have been recorded. In addition, the Company does not anticipate that the total amount of unrecognized tax benefit related to any particular tax position will change significantly within the next 12 months. |
The Company’s policy for recording interest and penalties, if any, will be to record such items as a component of income taxes. |
Net Income per Common Share | ' |
Net Income per Common Share |
Basic net income per common share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the periods. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The potential dilutive securities (common stock equivalents) the Company had outstanding were warrants and stock options. The following is a reconciliation of weighted average shares outstanding used in calculating earnings per common share: |
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| | Year Ended June 30, | | | | | |
| | 2013 | | | 2014 | | | | | |
Basic | | | 22,160,101 | | | | 24,631,284 | | | | | |
Assumed exercise of stock options | | | 473,601 | | | | 1,012,281 | | | | | |
| | | | | | | | | | | | |
Diluted | | | 22,633,702 | | | | 25,643,565 | | | | | |
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Potential common stock equivalents totaling 1,696,997 and 1,140,539 for FY 2013 and FY 2014, respectively, have been excluded from the computation of diluted earnings per share because the effect is anti-dilutive. |
Recently Issued Accounting Pronouncements | ' |
Recently Issued Accounting Pronouncements |
Previously, in August 2010, the FASB, as result of a joint project with the International Accounting Standards Board (“IASB”) to simplify lease accounting and improve the quality of and comparability of financial information for users, published proposed standards that would change the accounting and financial reporting for both lessee and lessor under ASC Topic 840, Leases. Since then, the FASB and IASB have been deliberating submitted comments about their 2010 proposals and other feedback from constituents. On May 16, 2013, both the FASB and the IASB issued nearly identical exposure drafts that retained the most significant change to lease accounting rules from the 2010 proposed standards, the elimination of the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. However, the 2013 exposure drafts include significant modifications, among them the establishment of two types of lease contracts for both lessees and lessors. Instead of capital and operating leases, the proposed rules create two types of leases (both similar to capital leases for lessees), which the FASB and IASB refer to as “Type A” and “Type B.” In addition, the revised exposure drafts seek to correct issues, noted by many commenters, related to the pattern and classification of expense recognition as well as the definition of “lease term” and the treatment of variable lease payments under the 2010 proposed standards. The Company believes that the final standards, if issued in substantially the same form as the revised exposure drafts, would have a material effect in the presentation of its consolidated financial position and results of operations. |
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers: Topic 606. ASU 2014-09 completes the joint effort by the FASB and IASB to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards (“IFRS”). ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. ASU 2014-09 is effective for public entities for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and entities have the choice to apply ASU 2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information. The Company is currently evaluating the requirements of ASU 2014-09 and has not yet determined its impact on its consolidated financial statements. |
In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718) –Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Services Period (ASU 2014-12). The amendments in ASU 2014-12 provide guidance for determining compensation cost under specific circumstances when an employee is eligible to vest in an award regardless of whether the employee is rendering service on the date the performance target is achieved. ASU 2014-12 becomes effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted. The Company is currently evaluating the effects of ASU 2014-12 on its financial statements and disclosures, if any. |