The Modular Building Institute estimates that the U.S. modular space industry generated $3.0 billion of leasing and sales revenues (excluding manufacturing operations) in 2003. The industry has expanded rapidly over the last thirty years as the number of applications for modular space has increased and recognition of the product's positive attributes has grown. By outsourcing their space needs, customers are able to achieve flexibility, preserve capital for core operations, and convert fixed costs into variable costs. Flexibility and reusability are the hallmarks of modular buildings. Unlike structures built on-site which generally have a fixed utilization and occupancy design, a modular product is not site specific and can be reutilized. It is not unusual to have modular buildings serve a wide variety of users during their life spans.

Companies within the modular space industry typically offer three major product types: single-wide modular space units, section modular space units and modular classrooms. Single-wide and section modular space units are used in a variety of customer applications, including field offices at construction sites, rental facilities, hospital diagnostic annexes, special events headquarters, golf pro shops and larger general commercial offices. The section modular units are comprised of high-end modular units that are grouped in specialized configurations to meet a variety of needs for corporations, federal, state and local governments and other entities. The multi-unit complexes are used for a variety of applications such as general office space, healthcare facilities, military installations, workforce housing and detention facilities. Modular classrooms serve the education market and are generally double-wide units that have been configured to serve as classrooms, computer and science labs and media centers, among other applications. Educational units are leased to school districts, which typically demand quality units supported by a high level of customer service and local knowledge. Demand for modular classrooms has continued to increase due to an increase in state and local initiatives governing restricting class sizes, pressures to find cost-effective ways to expand classroom capacity, increased interstate and intrastate migrations necessitating rapid expansion of education space in particular regions or localities, the continued growth of the school age population and facility modernization.

Single-wide modular space units which include mobile offices are the most functional and versatile units in the Company’s lease fleet. Units typically have "open interiors" which can be modified using movable partitions. Single-wide modular space units include tile floors, air conditioning/heating units, partitions and, if requested, toilet facilities. Section modulars are two or more units combined into one structure. Interiors are customized to match the customer needs. Examples of section modular units include hospital diagnostic annexes, special events headquarters, golf pro shops and larger general commercial offices. Classroom units are generally standard double-wide units adapted specifically for use by school systems or universities. Classroom units usually feature chalkboards and teaching aids, air conditioning/heating units, windows along side-walls and, if requested, toilet facilities. Sales offices are marketed to businesses that require site located space for sales presentations. Exteriors are typically wood-sided with some models offering recessed front entries. The Company’s "Executive Line" sales offices are larger, more expensive versions of the standard sales office with more amenities. Storage products are windowless and are typically used for secure storage space. The Company’s storage units are primarily ground-level entry storage containers with swing doors. These units are made of heavy exterior metals for security and water tightness.

As part of its leasing operations, the Company sells used modular space units from its lease fleet either at fair market value or, to a much lesser extent, pursuant to pre-established lease purchase options included in the terms of the Company’s lease agreements. New unit sales include sales of newly-manufactured modular space units. The Company does not generally purchase new units for resale until it has obtained firm purchase orders (which are generally non-cancelable) for such units. New modular space units are generally purchased more heavily in the late spring and summer months due to seasonal classroom and construction market requirements.

The Company provides delivery, site-work, installation and other services to customers as part of its leasing and sales operations.

Gross profit for the year ended December 31, 2004 was $190.8 million, a $12.9 million or 7.3% increase from the gross profit for the year ended December 31, 2003.

Selling, general and administrative expenses for the year ended December 31, 2004 increased approximately $7.1 million or 9.3% to $83.4 million from $76.3 million for the year ended December 31, 2003.

Interest expense for the year ended December 31, 2004 increased by $5.3 million or 6.0% to $92.4 million from $87.2 million for the year ended December 31, 2003.

For the year ended December 31, 2004 and 2003, income tax expense (benefit) was $3.6 million and ($7.1) million, respectively.