McGrath RentCorp. (MGRC)
Q2 2010 Earnings Call
August 05, 2010 05:00 pm ET
Geoffrey Buscher - IR, SBG Investor Relations
Keith Pratt - SVP and CFO
Dennis Kakures - President and CEO
David Gold – Sidoti & Co.
Scott Schneeberger - Oppenheimer
Jamie Sullivan – RBC Capital Markets
Welcome to the McGrath RentCorp Second Quarter 2010 Conference Call. At this time, all conference participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator instructions). This conference is being recorded today, Thursday August 5, 2010.
Now, I would like to turn the conference over to Geoffrey Buscher of SBG Investor Relations. Please go ahead, sir.
Good afternoon. I am the Investor Relations Advisor to McGrath RentCorp, and will be acting as moderator of the conference call today. Representatives 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 48 hours following the call by dialing 1800-406-7325 for domestic callers, and 1-303-590-3030 for international callers. The pass code for the call replay is 4329570.
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 4:05 pm Eastern Time or 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 1206-652-9704 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, the second quarter 2010 Form 10-Q.
For the second quarter 2010, total revenues were flat at $66.5 million compared to the same period in 2009. Net income increased 5% to $7.4 million, or $0.31 per diluted share from $7 million or $0.30 per diluted share for the same period in 2009.
Reviewing the second quarter results for the company's Mobile Modular division compared to the second quarter of 2009, total revenues decreased $7.1 million, or 19% to $29.9 million due to lower rental, rental related services and sales revenues.
Gross profit on rents decreased $4.1 million, or 27% to $11.2 million due to 13% lower rental revenues with rental margins decreasing to 55% from 65% in 2009. Lower rental margins were a result of lower rental revenues combined with flat depreciation, and $1 million higher other direct costs, for labor and materials to support higher activity levels.
Selling and administrative expenses, increased 3% 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, $1.2 million lower gross profit on sales and increased selling and administrative expenses resulted in the decrease in operating income of $5.5 million, or 45% to $6.7 million.
Finally, average modular rental equipment for the quarter was $489 million, an increase of $12 million. Average utilization for the second quarter decreased from 75.3% in 2009 to 67.7% in 2010.
Turning next to second quarter results for the company's TRS-RenTelco division compared to the second quarter of 2009. Total revenues increased $1.6 million, or 7% to $25.7 million, due to higher rental revenues.
Gross profit on rents increased $2.7 million, or 53% to $7.6 million. Rental revenues increased $2 million, or 11%, and rental margins increased to 39% from 28%, as depreciation as a percentage of rents decreased to a 46% from 57%.
Selling and administrative expenses increased $0.4 million, or 7%, to $6.1 million. As a result, operating income increased $2.7 million, or 193% to $4 million, from $1.4 million.
Finally, average electronics rental equipment at original cost for the quarter was $242 million, a decrease of $7 million. Average utilization for the second quarter increased from 59.5% in 2009 to 66.2% in 2010.
Turning next to second quarter results for the company's Adler Tanks division compared to the second quarter of 2009. Total revenues increased $4.8 million, or 92% to $10 million, primarily due to higher rental revenues.
Gross profit on rents increased $3.1 million or 134% to $5.4 million. Rental revenues increased $3.9 million, or 103% and rental margins increased to 71% from 62% as depreciation as a percentage of rents decreased to 17% from 21%.