McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business to business rental company, today announced revenues for the quarter ended September 30, 2012 of $99.4 million, a decrease of 5%, compared to $104.9 million in the third quarter of 2011. The Company reported net income of $12.5 million, or $0.50 per diluted share for the third quarter of 2012, compared to net income of $15.4 million, or $0.62 per diluted share, in the third quarter of 2011.
Dennis Kakures, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“Although Company-wide rental revenues increased 4% from a year ago, we had a 19% drop in EPS for the quarter. The reduction of $0.12 of EPS was primarily related to Enviroplex, our non-core California classroom manufacturing business having lower equipment sales of approximately $9.3 million, and to a lesser degree, margin compression during the quarter from a year ago. These items accounted for approximately $0.08 of the EPS reduction. The sales revenue shortfall was chiefly related to projects that will bill either later in 2012, or in early 2013. The margin compression reduction in Enviroplex profitability resulted from cost overruns on multiple custom projects moving through the plant during the same time frame. Additionally, as a result of the in-plant bottleneck, and needing to meet our delivery commitment time frames, a considerable amount of work was completed on site. This site work was considerably more costly due to significant inefficiencies between in-plant and field production work, and prevailing wage labor rates. Looking forward, we anticipate continued margin compression on Enviroplex’s sales revenues over the next quarter or two as these projects are completed. The remaining EPS reduction of $0.04 from a year ago was due to higher depreciation expense on a larger sized, but lower utilized fleet and higher interregional transportation costs to move equipment primarily from Northeastern to Southern U.S. rental markets for Adler, lower equipment sales and related gross profit in our modular division, partially offset by higher profitability at TRS-RenTelco.