McGrath RentCorp (
Q3 2010 Earnings Call
November 1, 2010 5:00 p.m. ET
Geoffrey Buscher - IR, SBG Investor Relations
Keith Pratt - SVP and CFO
Dennis Kakures - President and CEO
David Gold – Sidoti & Co.
Scott Schneeberger – Oppenheimer
John Gibbons – Odin Partners
Les Bryant – UBS Financial Services
Previous Statements by MGRC
» McGrath RentCorp. Q2 2010 Earnings Call Transcript
» McGrath RentCorp Q1 2010 Earnings Call Transcript
» McGrath RentCorp Q2 2009 Earnings Call Transcript
» McGrath RentCorp Q1 2009 Earnings Call Transcript
Welcome to the McGrath RentCorp third quarter 2010 conference call. [Operator Instructions.] This conference is being recorded today, Monday, November 1, 2010. Now I would like to turn the conference over to Geoffrey Buscher of SBG Investor Relations. Please go ahead.
Thank you operator. Good afternoon. I am the Investor Relations Advisor to McGrath RentCorp, and will be acting as moderator of the conference call today. On the call today from McGrath RentCorp are Dennis Kakures, President and CEO, and Keith Pratt, Vice President and CFO.
Please note that this call is being recorded and will be available for telephone replay for up to 7 days following the call by dialing 1-800-406-7325 for domestic callers, and 1-303-590-3030 for international callers. The passcode for the call replay is 4375366.
This call is also being broadcast live via the Internet and will be available for replay. We encourage you to visit the Investor Relations section of the company's website at mgrc.com.
A press release was sent out today at approximately 4:05 pm Eastern Time, which is 1:05 pm Pacific Time. If you did not receive a copy, but would like one, it is available online in the Investor Relations section of our website, or you may call 1-206-652-9704 and one will be sent to you.
Before getting started, let me remind everyone that the matters we will be discussing today that are not truly historical are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding McGrath RentCorp's expectations, beliefs, intentions or strategies regarding the future.
All forward-looking statements are based upon information currently available to McGrath RentCorp, and McGrath RentCorp assumes no obligation to update any such forward-looking statements.
Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to McGrath RentCorp's business are set forth in the documents filed by McGrath RentCorp with the Securities and Exchange Commission, including the company's most recent Form 10-K and Form 10-Q.
I would now like to turn the call over to Keith Pratt.
Thank you Geoffrey. In addition to the press release issued today, the company also filed with the SEC the earnings release on Form 8-K and its third quarter 2010 form 10-Q. For the third quarter 2010, total revenues increased 10% to $83.2 million from $75.5 million for the same period in 2009. Net income increased 2% to $9.7 million from $9.5 million for the same period a year ago. Earnings per diluted share remained flat at $0.40 compared to the same period in 2009.
Reviewing the third quarter results for the company's mobile modular division compared to the third quarter of 2009, total revenues decreased $2.8 million, or 7%, to $37.2 million due to lower rental and sales revenues.
Gross profit on rents decreased $4.2 million, or 30% to $9.8 million, due to 7% lower rental revenues, with rental margins decreasing to 47% from 62% in 2009. Lower rental margins were a result of lower rental revenues combined with $2.6 million higher other direct costs for labor and materials to support higher activity levels in our inventory centers and flat depreciation.
Selling and administrative expenses increased 9% to $7.3 million as a result of increased investment in our mid-Atlantic and portable storage growth initiatives. The lower gross profit on rents, rental-related services, and sales, combined with increased selling and administrative expenses, resulted in a decrease in operating income of $6.4 million, or 53%, to $5.7 million.
Finally, average modular rental equipment for the quarter was $494 million, an increase of $16 million. Average utilization for the third quarter decreased from 71.1% in 2009 to 67.8% in 2010.
Turning next to third quarter results for the company's TRS-RenTelco division, compared to the third quarter of 2009, total revenues increased $3.5 million, or 15%, to $27.3 million, due to higher rental revenues. Gross profit on rents increased $3.4 million, or 55%, to $9.2 million. Rental revenues increased $3.3 million, or 18%, and rental margins increased to 42% from 32% as depreciation as a percentage of rents decreased to 42% from 53%.
Selling and administrative expenses increased $0.6 million, or 14%, to $5.3 million, primarily due to investment in our TRS environmental growth initiative. As a result, operating income increased $3.1 million, or 92%, to $6.5 million, from $3.4 million.
Finally, average electronics rental equipment at original cost for the quarter was $246 million, a decrease of $1 million. Average utilization for the third quarter increased from 60.4% in 2009 to 67.7% in 2010.
Turning next to third quarter results for the company's Adler Tanks division, compared to the third quarter of 2009, total revenues increased $6.3 million, or 95%, to $13 million, primarily due to higher rental and rental-related services revenues.
Gross profit on rents increased $4.1 million, or 122%, to $7.5 million. Rental revenues increased $5.1 million, or 102%, and rental margins increased to 75% from 68% as depreciation as a percentage of rents decreased to 14% from 18% and other direct costs decreased to 11% from 14% in 2009.