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McGrath RentCorp Announces Results For First Quarter 2012

Reconciliation of Adjusted EBITDA to the most directly comparable GAAP measures

To supplement the Company’s financial data presented on a basis consistent with accounting principles generally accepted in the United States of America (“GAAP”), the Company presents “Adjusted EBITDA”, which is defined by the Company as net income before interest expense, provision for income taxes, depreciation, amortization, and non-cash stock-based compensation. The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company’s liquidity and financial condition and because management, as well as the Company’s lenders, use this measure in evaluating the performance of the Company.

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company’s period-to-period operating performance, compliance with financial covenants in the Company’s revolving lines of credit and senior notes and evaluate the Company’s ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including stock-based compensation, is useful in measuring the Company’s cash available for operations and the performance of the Company. Because management finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company’s performance.

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP or as a measure of the Company’s profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA, which may be used by other companies or investors, Adjusted EBITDA does not include stock-based compensation charges. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA for purposes of comparison. The Company’s presentation of Adjusted EBITDA should not be construed as an inference that the Company will not incur expenses that are the same as or similar to the adjustments in this presentation. Therefore, Adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company’s performance. Because Adjusted EBITDA is a non-GAAP financial measure as defined by the SEC, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States.

Reconciliation of Net Income to Adjusted EBITDA

 
( dollar amounts in thousands)   Three Months Ended

March 31,

    Twelve Months Ended

March 31,

2012     2011   2012     2011  
Net Income $ 9,911 $ 9,614 49,899 $ 39,446
Provision for Income Taxes 6,390 6,198 31,648 24,555
Interest   2,173   1,482   8,297   6,159
Income from Operations 18,474 17,294 89,844 70,160
Depreciation and Amortization 17,516 16,174 68,737 63,494
Non-Cash Stock-Based Compensation   994   1,024   5,191   4,231
Adjusted EBITDA 1 $ 36,984 $ 34,492 $ 163,772 $ 137,885
 
Adjusted EBITDA Margin 2 47 % 47 % 47 % 46 %

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

 
( dollar amounts in thousands)   Three Months Ended

March 31,

    Twelve Months Ended

March 31,

2012     2011   2012     2011  
Adjusted EBITDA 1 $ 36,984 $ 34,492 $ 163,772 $ 137,885
Interest Paid (1,071 ) (1,335 ) (6,613 ) (6,421 )
Net Income Taxes Paid (Refunds Received) (1,199 ) 5,067 (4,786 ) (3,115 )
Gain on Sale of Rental Equipment (3,073 ) (3,055 ) (12,462 ) (12,615 )
Change in certain assets and liabilities:
Accounts Receivable, net 7,705 1,565 (10,043 ) (11,882 )
Prepaid Expenses and Other Assets (4,156 ) (2,943 ) (4,439 ) (4,562 )
Accounts Payable and Other Liabilities (1,697 ) (2,912 ) 5,219 (846 )
Deferred Income   1,989     4,521     (1,255 )   8,945  
Net Cash Provided by Operating Activities $ 35,482   $ 35,400   $ 129,393   $ 107,389  

1

  Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, and non-cash stock-based compensation.

2

Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.




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