(8) Rental Fleet

Rental fleet is capitalized at cost and depreciated over the estimated useful life of the unit using the straight-line method. Rental fleet is depreciated whether or not it is out on rent. Capitalized cost of rental fleet includes the price paid to acquire the unit and freight charges to the location when the unit is first placed in service, and when applicable, the cost of manufacturing or remanufacturing, which includes the cost of customizing units. Ordinary repair and maintenance costs are charged to operations as incurred.

Management periodically reviews depreciable lives and residual values against various factors, including the results of its lenders’ independent appraisal of rental fleet, practices of competitors in comparable industries, profit margins achieved on sales of depreciated units and rental rates obtained on older units. See Note 5 for information regarding the impairment of wood mobile offices during the quarter ended March 31, 2015.

 

Appraisals on our portable storage fleet are conducted on a regular basis by an independent appraiser selected by our lenders. Based on the values assigned in the most recent appraisal as of September 30, 2014, our portable storage rental fleet net liquidation value was approximately $1.0 billion as of March 31, 2015. In addition, an appraisal of our specialty product fleet was conducted as of December 2014 in conjunction with the ETS Acquisition. Based upon the values assigned in this appraisal, our specialty product rental fleet net liquidation value was approximately $90.7 million as of March 31, 2015. These appraisals were conducted by AccuVal Associates, Incorporated and are used to calculate our available borrowings under our Credit Agreement, as defined in Note 11.

The Company’s depreciation expense related to its rental fleet for the three months ended March 31, 2015 and 2014 was $9.2 million and $5.3 million, respectively. At March 31, 2015 and December 31, 2014, all of the Company’s rental fleet units were pledged as collateral under the Credit Agreement.

 

Rental fleet consisted of the following at March 31, 2015 and December 31, 2014:

 

		Residual Value as Percentage of Original Cost (1)				Useful Life in Years		March 31, 2015				December 31, 2014
								(In thousands)
Portable Storage:
Steel storage containers			55	%		30		$	602,360			$	604,547
Ground level offices			55	%		30			330,891				329,565
Wood mobile offices			50	%		20			143,894				208,529
Other									5,230				5,633
Total									1,082,375				1,148,274
Accumulated depreciation									(186,209	)			(182,437	)
Total portable storage fleet, net								$	896,166			$	965,837
Specialty Containment:
Steel tanks						25		$	52,031			$	50,843
Roll-off boxes						15 - 20			23,247				19,820
Stainless steel tank trailers						25			8,189				7,667
Vacuum boxes						20			23,287				23,283
De-watering boxes						20			4,271				3,898
Pumps and filtration equipment						7			11,655				11,510
Other									5,954				5,468
Total									128,634				122,489
Accumulated depreciation									(5,137	)			(1,270	)
Total specialty containment fleet, net								$	123,497			$	121,219
Total rental fleet, net								$	1,019,663			$	1,087,056

 

(1)	Specialty containment fleet has been assigned zero residual value.