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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

For the fiscal year ended December 31, 2001

Commission file number 0-13292

McGrath Rentcorp

5700 Las Positas Road, Livermore, CA 94550

Registrant’s telephone number: (925) 606-9200

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Title of Class

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

      State the aggregate market value of voting stock, held by nonaffiliates of the registrant: $274,289,807 as of March 15, 2002.

      At March 15, 2002, 12,455,859 shares of Registrant’s Common Stock were outstanding.

      Exhibit index appears on page 50

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PART I

Item 1.     Business

General

      McGrath RentCorp (the “Company”) is a California corporation organized in 1979. The Company is comprised of three business segments: “Mobile Modular Management Corporation” (“MMMC”), its modular building rental division, “RenTelco,” its electronic test equipment rental division, and “Enviroplex,” its majority-owned subsidiary classroom manufacturing business. The Company’s corporate offices are located in Livermore, California. In addition, branch operations for both rental divisions are conducted from this facility.

      MMMC rents and sells modular buildings and accessories to fulfill customers’ temporary and permanent space needs in California and Texas. These units are used as temporary offices adjacent to existing facilities, and are used as classrooms, sales offices, construction field offices, health care clinics, child care facilities and for a variety of other purposes. MMMC purchases the modulars from various manufacturers who build them to MMMC’s design specifications. MMMC operates from two branch offices in California and one in Texas. Although MMMC’s primary emphasis is on rentals, sales of modulars routinely occur and can fluctuate quarter to quarter and year to year depending on customer demands and requirements.

      The educational market is the largest segment of the modular business. MMMC provides classroom and specialty space needs serving schools from pre-school to post secondary grade levels. Fueled by increasing student population, insufficient funding for new school construction and aging school facilities, demand continues to be very strong in California. Within the educational market, rentals and sales to California public school districts by MMMC represent a significant portion of MMMC’s total revenues.

      RenTelco rents and sells electronic test equipment nationally from two locations. The Plano, Texas location houses the Company’s communications and fiber optic test equipment inventory, calibration laboratory and eastern U.S. sales engineer and operations staffs. The Livermore, California location houses the Company’s general-purpose test equipment inventory, calibration laboratory and western U.S. sales engineer and operations staffs.

      Communications and fiber optic test equipment is utilized by field technicians, engineers and installer contractors in evaluating voice, data and multimedia communications networks, installing optical fiber cabling and in the development of switch, network and wireless products. This test equipment is rented primarily to network systems companies, electrical contractors, local & long distance carriers and manufacturers of communications transmission equipment. RenTelco purchases communications test equipment from over 40 different manufacturers domestically and abroad.

      Engineers, scientists and technicians utilize general-purpose test equipment in evaluating the performance of their own electrical and electronic equipment, developing products, controlling manufacturing processes and in field service applications. These instruments are rented primarily to electronics, industrial, research and aerospace companies. Agilent (formerly Hewlett Packard), Tektronix and Acterna manufacture the majority of the Company’s general-purpose equipment.

      McGrath RentCorp owns 81% of Enviroplex, a California corporation organized in 1991. Enviroplex manufactures portable classrooms built to the requirements of the California Division of the State Architect (“DSA”) and sells directly to California public school districts. Enviroplex conducts its sales and manufacturing operations from its facility located in Stockton, California. Since inception, McGrath RentCorp has assisted Enviroplex in a variety of corporate functions such as accounting, human resources, facility improvements and insurance. McGrath RentCorp has not purchased significant quantities of manufactured product from Enviroplex. Enviroplex sales revenues were $15.0 million, $17.0 million and $11.2 million in 2001, 2000 and 1999, respectively.

      The rental (by MMMC) and sale (by Enviroplex and MMMC) of modulars to California public school districts for use as portable classrooms, restroom buildings and administrative offices for kindergarten through

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      Please see Note 8 to the Consolidated Financial Statements on page 37 for more information on the Company’s business segments.

      The Company has 418 employees, of whom 48 are primarily administrative and executive personnel, and the remaining 370 are engaged in manufacturing or rental operations. Unions represent none of these employees. The operations of the Company share common facilities, financing, senior management, and operating and accounting systems, which results in the efficient use of overhead. Each product line has its own sales and technical personnel.

      No single customer has accounted for more than 10% of the Company’s total revenues generated in any given year. The Company’s business is not seasonal, except for the rental and sale of classrooms, which is heaviest in the several months prior to the opening of school each fall.

      The Company operates with a marketing sense throughout. The Company is constantly searching for ways to streamline its service and to raise the quality of each relocatable office, classroom or instrument it rents, sells or manufactures. The Company not only rents, sells and manufactures products, it sells an old-fashioned idea: Paying attention to our customers pays off.

      The Company’s common stock is traded on the NASDAQ National Market System under the symbol “MGRC.”

      On December 20, 2001, the Company entered into a merger agreement with a subsidiary of Tyco International Ltd. See “Merger Agreement with Tyco” on page 9.

      This Annual Report on Form 10-K contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places. Such statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “estimates”, “will”, “should”, “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include the effectiveness of management’s strategies and decisions, general economic and business conditions, new or modified statutory or regulatory requirements and changing prices and market conditions. This report identifies other factors that could cause such differences. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

RELOCATABLE MODULAR OFFICES

Description

      Modulars are designed for use as temporary office space and may be moved from one location to another. Modulars vary from simple single-unit construction site offices to attractive multi-modular facilities, complete with wood exteriors and mansard roofs. The rental fleet includes a full range of styles and sizes. The Company considers its modulars to be among the most attractive and well designed available. The units are constructed with wood siding, sturdily built and physically capable of a useful life often exceeding 18 years. Units are provided with installed heat, air conditioning, lighting, electricity and floor covering, and may have customized interiors including partitioning, carpeting, cabinetwork and plumbing facilities.

      MMMC purchases new modulars from various manufacturers who build to MMMC’s design specifications. None of the principal suppliers are affiliated with the Company. During 2001, the Company purchased 34% of its modular product from one manufacturer with multiple operations in several states. The Company believes that the loss of its primary manufacturer of modulars would not have a material adverse effect on its

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      The modular product is manufactured to state building codes, has a low risk of obsolescence, and can be modified or reconfigured to accommodate a wide variety of customer needs. MMMC proactively manages its rental equipment and believes this insures the continued use of the modular product over its long life and, when sold, generates high sale proceeds relative to its capitalized cost. When rental equipment returns from a customer, the necessary repairs and preventative maintenance are performed prior to its next rental. Making these expenditures for repair and maintenance throughout the equipment’s life results in older equipment renting for similar rates as newer equipment. MMMC believes the condition of the equipment is a more significant factor in determining the rental rate and sale price than its age. Over the last three years, used equipment sold in the ordinary course of business has been on average 10 years old with sale proceeds averaging better than 95% of the equipment’s capitalized cost.

Marketing

      The Company’s largest single demand is for temporary classroom and other educational space needs of public and private schools, colleges and universities. Management believes the demand for classrooms is caused by shifting and fluctuating school populations, the lack of state funds for new construction, the need for temporary classroom space during reconstruction of older schools and, several years ago, class size reduction (see “Classroom Rentals and Sales” below). Other customer use applications include sales offices, construction field offices, health care facilities, sanctuaries and child care services. Industrial, manufacturing, entertainment and utility companies, as well as governmental agencies commonly use large multi-modular complexes to serve their interim administrative and operations space needs. The modular product offers customers quick, cost-effective space solutions while conserving their capital. The Company’s branch and corporate offices, with the exception of RenTelco’s Plano facility and Enviroplex’s facility, are housed in various sizes of modulars.

      Since most of MMMC’s customer requirements are to fill temporary space needs, the Company’s marketing emphasis is on rentals rather than sales. MMMC attracts customers through its dynamic web site at www.mobilemodularrents.com, and extensive yellow page advertising, telemarketing and direct mail. Customers are encouraged to visit an inventory center to view different models on display and to see a branch office, which itself is a working example of a modular application.

      Because service is a major competitive factor in the rental of modulars, MMMC offers quick response to requests for information, assistance in the choice of a suitable size and floor plan, in-house customization services, rapid delivery, timely installation and maintenance of its units. Customers are able to view and select inventory for quote on MMMC’s website.

Rentals

      Rental periods range from one month to ten years with a typical rental period of eighteen months. Most rental agreements provide no purchase options; and when a rental agreement does provide the customer with a purchase option, it is generally on terms attractive to MMMC.

      The customer is responsible for obtaining the necessary use permits and the costs of insuring the unit, transporting the unit to the site, preparation of the site, installation of the unit, dismantle and return delivery of the unit to one of MMMC’s three inventory centers, and certain costs for customization. MMMC maintains the units in good working condition while on rent. Upon return, the units are inspected for damage and customers are billed for items considered beyond normal wear and tear. Generally, the units are then repaired for subsequent use. Repair and maintenance costs are expensed as incurred and can include floor tile repairs, roof maintenance, cleaning, painting and other cosmetic repairs. The costs of major refurbishment of equipment are capitalized to the extent the refurbishment significantly improves the quality and adds value or life to the equipment.

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      At December 31, 2001, MMMC had 18,554 new or previously rented modulars in its rental fleet with an aggregate original cost including accessories of $281.2 million or an average cost per unit of $15,200. Utilization is calculated each month by dividing the cost of rental equipment on rent by the total cost of rental equipment, excluding new equipment inventory and accessory equipment. At December 31, 2001, fleet utilization was 86.2% and average fleet utilization during 2001 was 85.4%.

Sales

      In addition to operating its rental fleet, MMMC sells modulars to customers. These sales arise out of its marketing efforts for the rental fleet. Such sales can be of either new units or used units from the rental fleet, which permits an orderly turnover of older units. During 2001, MMMC’s largest sale of modulars was for new classrooms to a school district for approximately $0.6 million. This sale represented approximately 4% of MMMC’s sales, 2% of the Company’s consolidated sales, and less than 1% of the Company’s consolidated revenues.

      MMMC provides limited 90-day warranties on used modulars and passes through manufacturers’ one-year warranty on new units. Warranty costs have not been significant to MMMC’s operations to date, and MMMC attributes this to its commitment to high quality standards and regular maintenance programs.

      In addition to MMMC’s sales, the Company’s subsidiary, Enviroplex, manufactures and sells portable classrooms to school districts in California (see “Classroom Sales by Enviroplex” below).

Competition

      This section contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. See “General” above for cautionary information with respect to such forward-looking statements.

      Management estimates the business of renting relocatable modular offices is an industry that today has equipment on rent or available for rent in the United States with an aggregate original cost in excess of 4.0 billion dollars. Competition in the rental and sale of relocatable modular offices is intense. Two national firms are engaged in the rental of modulars, have many offices throughout the country and may have substantially greater financial resources than MMMC. Several hundred other companies are estimated to operate regionally throughout the country. MMMC operates primarily in California and Texas. Significant competitive factors in the rental business include availability, price, services, reliability, appearance and functionality of the product. MMMC markets high quality, well constructed and attractive modulars. MMMC believes that part of the strategy for modulars should be to create facilities and infrastructure capabilities that its competitors cannot easily duplicate. The Company’s facilities and related infrastructure enable it to modify modulars efficiently and cost effectively to meet its customers’ needs. Management’s goal is to be more responsive at less expense. Management believes this strategy, together with its emphasis on prompt and efficient customer service, gives MMMC a competitive advantage. The Company is determined to offer quick response to requests for information, experienced assistance for the first-time user, rapid delivery and timely maintenance of its units. The efficiency and responsiveness continues to be enhanced by the Company’s computer based relational database programs that control its internal operations. MMMC anticipates strong competition in the future and believes its process of improvement is ongoing.

Classroom Sales by Enviroplex

      This section contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. See “General” above for cautionary information with respect to such forward-looking statements.

      Enviroplex manufactures moment-resistant, rigid steel framed portable classrooms built to the requirements of the DSA and sells directly to California public school districts. The moment-resistant, rigid steel-framed classroom is engineered to have the structural columns support the weight of the building. This offers the customer greater design flexibility as to overall classroom size and the placement of doors and

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      During 2001, Enviroplex’s largest sale was for $2.2 million of new classrooms to a school district. This sale represented 15% of Enviroplex’s sales, 6% of the Company’s consolidated sales and less than 2% of the Company’s consolidated revenues. All of Enviroplex’s sales occur in California, with most sales occurring directly with California public school districts.

      Since Enviroplex’s customers are predominantly California public school districts, Enviroplex markets directly to these schools through telemarketing, targeted mailings and participation in the annual CASH (Coalition for Adequate School Housing) tradeshow. Enviroplex also attracts customers through its website at www.enviroplexinc.com where customers are able to view a variety of DSA approved floor plans. Customers are encouraged to tour the manufacturing facility to experience the production process and examine the quality product built.

      Competition in the manufacture of DSA classrooms is broad, intense, and highly competitive. Several manufacturers have greater capacity for production and have been in business longer than Enviroplex. Larger manufacturers with greater capacity have a larger appetite for the standard classroom while Enviroplex caters to schools’ requirements for more customized classrooms. The remaining manufacturers are of a similar size or smaller and do not have the production capacity nor the financial resources of Enviroplex.

      Enviroplex manufactures solid, attractive classrooms. Through value engineering, Enviroplex has simplified its manufacturing process by changing materials, determining which components are made in-house versus purchased, reducing the number of components and increasing the production efficiency at an overall lower cost without sacrificing quality. Enviroplex’s strategy is to improve the quality and flexibility of its product. Enviroplex understands that its customers want more than a quality classroom, competitively priced and delivered on time, and believes its niche is providing customers with choices in design flexibility and customization. Management believes this strategy gives Enviroplex a competitive edge.

      Enviroplex provides a one-year warranty on equipment manufactured. Warranty costs have not been significant to Enviroplex’s operations to date that can be attributed to Enviroplex’s dedication to manufacturing and delivering a quality, problem-free product.

      Enviroplex purchases raw materials from a variety of suppliers. Each component part has multiple suppliers. Enviroplex believes the loss of any one of these suppliers would not have a material adverse affect on its operations.

Classroom Rentals and Sales to California Public Schools (K-12)

      The rental and sales of modulars to California public school districts for use as portable classrooms, restroom buildings and administrative offices for kindergarten through grade twelve (K-12) are a significant portion of the Company’s revenues. The following table shows the approximate percentages these schools are of the Company’s modular rental and sales revenues, and of its consolidated rental and sales revenues for the past five years:

     California Public Schools (K-12) as a Percentage of Rental and Sales Revenues

      The increased modular sales percentage shown for 1998 and 1997 can be attributed to the Class Size Reduction Program instituted by the State of California. School districts were given great incentive to reduce

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Legislation

      In California (where most of the Company’s educational rentals have occurred), school districts are permitted to purchase only portable classrooms built to the requirements of the DSA. However, school districts may rent classrooms that meet either the Department of Housing (“DOH”) or DSA requirements. In 1988, California adopted a law which limited the term for which school districts may rent portable classrooms built to DOH standards for up to three years (under a waiver process), and also required the school board to indemnify the State against any claims arising out of the use of such classrooms. Prior to 1988 the majority of the classrooms in the Company’s rental fleet were built to the DOH requirements, and since 1988 almost all new classrooms have been built to the DSA requirements. During the 1990’s additional legislation was passed extending the use of these DOH classroom buildings under the waiver process through September 30, 2000.

      In 2000, new California legislation was passed allowing for DOH classroom buildings already in use for classroom purposes as of May 1, 2000 to be utilized until September 30, 2007, provided various upgrades were made to their foundation and ceiling systems. School districts have until August 31, 2002 to make the necessary modifications to extend their usage of these buildings. To the extent that school districts elect not to proceed with retrofitting these existing buildings on rent and return the equipment, rental income levels could be impacted negatively. Currently, regulations and policies are in place that allow for the ongoing use of DOH classrooms from the Company’s inventory to meet shorter term space needs of school districts for periods up to 24 months, provided they receive a “Temporary Certification” or “Temporary Exemption” from the DSA. As a consequence, the tendency is for school districts to rent the DOH classrooms for shorter periods and to rent the DSA classrooms for longer periods. At December 31, 2001, the net book value of DOH classrooms represented less than 2.6% of the net book value of modular rental equipment and less than 1.5% of the total assets of the Company, and the utilization of these DOH classrooms was at 85.1%.

ELECTRONIC TEST AND MEASUREMENT INSTRUMENTS

Description

      The Company’s communications and fiber optics rental inventory includes fiber, telecom, SONET, ATM, broadcast, copper, line simulator, microwave, network and transmission test equipment. The general-purpose inventory includes oscilloscopes, amplifiers, spectrum, network and logic analyzers, and CATV, component measurement, industrial, signal source, microprocessor development and power source test equipment. The Company also rents electronic instruments from other rental companies and re-rents the instruments to customers.

      At December 31, 2001, the Company had an aggregate cost of electronics rental inventory and accessories of $95.4 million. Utilization is calculated each month by dividing the cost of the rental equipment on rent by the total cost of the rental equipment, excluding accessory equipment. During 2001, utilization trended down from 63.5% as of December 31, 2000 to 34.4% as of December 31, 2001 reflecting broad-based weakness in the telecommunications industry. Average utilization during 2001 was 50.4%. Generally, the Company targets utilization levels in a range between 50% and 55%. The Company rents electronic equipment for a typical rental period of one to six months at monthly rental rates ranging from approximately 3.0% to 10.0% of the current manufacturers’ list price. The Company depreciates its equipment over 5 to 8 years.

      The Company endeavors to keep its equipment fresh and attempts to sell equipment so that the majority of the inventory is less than five years old. The Company generally sells used equipment after approximately four years of service to permit an orderly turnover and replenishment of the electronics inventory. In 2001, approximately 19% of the electronics revenues were derived from sales. The largest electronics sale during

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Market

      The business of renting electronic test and measurement instruments is an industry which today has equipment on rent or available for rent in the United States with an aggregate original cost in excess of a half billion dollars. While there is a broad customer base for the rental of such instruments, most rentals are to electronics, communications, network systems, electrical contractor, installer contractor, industrial, research and aerospace companies.

      The Company markets its electronic equipment throughout the United States. RenTelco attracts customers through its dynamic web site at www.rentelco.com, an extensive telemarketing program, trade show participation and direct mail campaigns.

      The Company believes that customers rent electronic test and measurement instruments for many reasons. Customers frequently need equipment for short-term projects, for backup to avoid costly downtime and to evaluate new products. Delivery times for the purchase of such equipment can be lengthy; thus, renting allows the customer to obtain the equipment expeditiously. The Company also believes that a substantial portion of electronic test and measurement instruments is used for research and development projects where the relative certainty of rental costs can facilitate cost control and be useful in bidding for government contracts. Finally, as is true with the rental of any equipment, renting rather than purchasing may better satisfy the customer’s budgetary constraints.

      The industry consists primarily of three major companies. One of these companies is much larger than the Company, has substantially greater financial resources and is well established in the industry with a large inventory of equipment, several branch offices and experienced personnel.

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PRODUCT HIGHLIGHTS

      The following table shows the revenue components, percentage of rental and total revenues, rental equipment (at cost), rental equipment (net book value), number of relocatable modular offices, year-end and average utilization, average rental equipment (at cost), annual yield on average rental equipment (at cost) and gross margin on rental revenues and sales by product line for the past five years.

Product Highlights

(1)	Utilization is calculated each month by dividing the cost of the rental equipment on rent by the total cost of rental equipment, excluding new equipment inventory and accessory equipment. Average Utilization is calculated using the average costs for the year.
(2)	Average rental equipment, at cost for modulars excludes new equipment inventory and accessory equipment.

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MERGER AGREEMENT WITH TYCO

      On December 20, 2001, the Company entered into an agreement (the “Merger Agreement”) with a subsidiary of Tyco International Ltd. (“Tyco”). Under the terms of the Merger Agreement, the Company would be merged into the Tyco subsidiary, with the Tyco subsidiary continuing as the surviving corporation and as a wholly-owned subsidiary of Tyco (the “Merger”). Tyco has guaranteed (the “Guarantee”) the obligations of its subsidiary under the Merger Agreement. The Merger Agreement provides that the consideration to be paid by Tyco will be in the form of cash and Tyco common shares. The Company’s shareholders are to have the right to elect what percentage of their consideration is to be paid in cash and what percentage is to be paid in Tyco common shares, subject to the limitation that no less than 50% and no more than 75% of the aggregate consideration to be paid to all shareholders be in the form of Tyco common shares. If the Company’s shareholders in total elect to receive more cash or more Tyco common shares than these limits allow, the Company’s shareholders that elect the consideration that exceeds the relevant limit will receive a combination of cash and Tyco common shares.

      Subject to this limitation, McGrath shareholders electing to receive cash will receive $38.00 for each share of the Company’s Common Stock; shareholders electing to receive Tyco common shares will receive a fraction (the “Exchange Ratio”) of a Tyco common share, determined by dividing $38.00 by the average trading price of Tyco’s common shares for the five trading days ending on the fourth trading day prior to the date of the Company’s shareholders meeting to consider approval of the Merger. The Merger Agreement provides, however, that Tyco may terminate the agreement if its average share price is less than $45.00 at the time of the calculation of the Exchange Ratio, unless the Company agrees to a fixed Exchange Ratio of .8444 of a Tyco common share for each share of the Company’s stock, or the parties agree to some other Exchange Ratio. At the time the Merger Agreement was entered into, Tyco’s share price was $57.20 per share. As of March 15, 2002, the closing price of Tyco common shares was $33.41.

      Certain officers and directors of the Company owning approximately 24% of the outstanding shares of the Company’s Common Stock have entered into agreements (“Shareholder Agreements”) pursuant to which such shareholders agreed, among other things, to vote their shares of the Company’s Common Stock in favor of the Merger.

      The consummation of the Merger is subject to the approval of the shareholders of the Company, the receipt of necessary approvals under United States and any applicable foreign antitrust laws, and other conditions.

      On March 12, 2002, CIT Group Inc., a subsidiary of Tyco formerly known as Tyco Capital Corporation, filed a General Form for Registration of Securities on Form 10 in connection with a proposed distribution of 100% of the shares of its common stock to Tyco shareholders. CIT Group’s Form 10 states that, prior to developing its current plan to distribute the common stock of CIT Group, Tyco intended to integrate the Company’s business with CIT Group’s business. The Form 10 also states that if Tyco’s acquisition of the Company is completed pursuant to the Merger Agreement, Tyco currently would expect to retain McGrath as part of Tyco’s business.

      The Merger Agreement may be terminated by either Tyco or the Company if the Merger is not consummated by June 30, 2002. Although Tyco filed a registration statement with respect to the Merger with the SEC on January 8, 2002, the SEC has not yet declared the registration statement effective. Approval of the Company’s shareholders cannot be sought until the SEC declares the registration statement effective. If the registration statement does not become effective in time for the Company to obtain shareholder approval prior to June 30, 2002, each party may have the right to terminate the Merger Agreement. In addition, if the market price for Tyco common shares is below $45 per share, the Company may elect to not agree to a fixed Exchange Ratio and Tyco will have the right to terminate the Merger Agreement. In light of these circumstances, including Tyco’s announced intention to restructure its business and divest itself of the CIT Group, the Company believes there is no assurance that the Merger will be consummated.

      The Merger Agreement (with the Guarantee) was attached as Exhibit 99.1, and the form of Shareholder Agreement was attached as Exhibit 99.2, to the Company’s Current Report on Form 8-K filed with the SEC

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Item 2.     Properties

      The Company currently conducts its operations from five locations. Inventory centers, at which relocatable modular offices are displayed, refurbished and stored are located in Livermore, California (San Francisco Bay Area), Mira Loma, California (Los Angeles Area) and Pasadena, Texas (Houston Area). These three branches conduct rental and sales operations from multi-modular offices, serving as working models of the Company’s product. Electronic test and measurement instrument rental and sales operations are conducted from the Livermore facility and from a facility in Plano, Texas (Dallas Area). The Company’s majority owned subsidiary, Enviroplex, manufactures portable classrooms from its facility in Stockton, California (San Francisco Bay Area).

      During 2000, the Company developed a 39,110 square foot office and warehouse facility on 2.6 acres of land in Plano, Texas. RenTelco relocated its operations from Richardson, Texas to the new Plano facility in September 2000 and currently occupies half of the constructed space. The Company has subleased the remaining half of the facility on a five-year lease beginning in March 2001.

      The following table sets forth for each property the total acres, square footage of office space, square footage of warehouse space and total square footage at December 31, 2001. The Company owns all properties, except as noted in footnote 4 of the Facilities table below.

     Facilities