McGrath RentCorp Announces Results For Second Quarter 2011

McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business to business rental company, today announced revenues for the quarter ended June 30, 2011 of $79.5 million, an increase of 20%, compared to $66.5 million in the second quarter of 2010. The Company reported net income of $11.4 million, or $0.46 per diluted share for the second quarter of 2011, compared to net income of $7.4 million, or $0.31 per diluted share, in the second quarter of 2010.

Dennis Kakures, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:

“Our Company-wide 19% increase in rental revenues for the quarter from a year ago reflects very favorable business activity and rental revenue increases in both our electronics and tank rental businesses. These very positive results were partly offset by our modular business rental revenues declining by 3% for the same comparative period.

For our electronics division, rental revenues for the quarter increased by $3.7 million, or 19%, to $23.6 million from a year ago. Income from operations increased by 96% to $7.9 million. In addition to higher rental revenues, our electronics business also benefited from higher gross profit on equipment sales and lower depreciation, laboratory and SG&A costs as a percentage of rental revenues from a year ago.

Our tank and box division rental revenues increased 81% to $13.8 million for the quarter, from $7.6 million a year ago. The strong increase in rental revenues was directly related to higher business activity levels and continued expansion of Adler’s rental equipment inventory. Income from operations was up over two and one-half times from a year ago to $7.8 million, as the business further leveraged existing employee and facility infrastructure, and also benefited from its base of longer term rental transactions.

Our modular division rental revenues for the second quarter decreased by $0.6 million, or 3%, to $19.8 million from a year ago. Rental revenues grew by 5% quarter over quarter in our markets outside of California; however, they declined by 8% within the state. California continues to be plagued by fiscal and unemployment rate challenges. Income from operations declined by $1.4 million, or 21%, to $5.2 million. The higher percentage reduction in income from operations was primarily due to higher SG&A expenses associated with the continued expansion of our portable storage rental initiative, and higher inventory center costs outside of California for the preparation of equipment for rental.

Our portable storage and environmental test equipment initiatives both continued to make good progress in their market penetration efforts and booking levels during the second quarter. Quarter over quarter rental revenues were up 115% and 88% respectively, for Mobile Modular Portable Storage and TRS-Environmental.

During the first half of 2011 we had a net addition of approximately $51 million in original cost of rental assets. These rental assets are primarily for the growth of Adler Tank Rentals, and for our test equipment and portable storage businesses.

As a result of our overall healthy business activity levels during the first half of 2011 and favorable outlook for the remainder of the year, we are increasing our full year earnings guidance range of $1.52 to $1.62 to a range of $1.65 to $1.75 per diluted share.”

All comparisons presented below are for the quarter ended June 30, 2011 to the quarter ended June 30, 2010 unless otherwise indicated.

MOBILE MODULAR

For the second quarter of 2011, the Company’s Mobile Modular division reported a 21% decrease in income from operations to $5.2 million. Rental revenues decreased 3% to $19.8 million and other direct costs increased 4% to $6.0 million, which resulted in a decrease in gross profit on rental revenues of 8% to $10.4 million. Sales revenues increased 3% to $4.2 million, with gross profit on sales revenues increasing 42% to $1.3 million, primarily due to higher margins on new equipment sales revenues in the second quarter of 2011. Selling and administrative expenses increased 8% to $7.8 million primarily as a result of increased investment in our Portable Storage growth initiative.

TRS-RENTELCO

For the second quarter of 2011, the Company’s TRS-RenTelco division reported a 96% increase in income from operations to $7.9 million. Rental revenues increased 19% to $23.6 million. The increase in rental revenues, partly offset by a 4% increase in depreciation to $9.4 million, and a 15% increase in other direct costs to $3.6 million, resulted in an increase in gross profit on rental revenues of 38% to $10.5 million. Sales revenues increased 30% to $6.4 million with gross profit on sales increasing 46% to $3.1 million, primarily due to higher margins on new and used equipment sales revenues in the second quarter of 2011. Selling and administrative expenses increased 4% to $6.3 million due to increased salary and benefit costs.

ADLER TANKS

For the second quarter of 2011, the Company’s Adler Tanks division more than doubled its income from operations to $7.8 million. Rental revenues increased 81% to $13.8 million, which resulted in an increase in gross profit on rental revenues of 98% to $10.7 million. Rental related services revenues increased 20% to $2.8 million, with gross profit on rental related services revenues increasing 47% to $0.8 million. Selling and administrative expenses increased 24% to $3.7 million, primarily due to increased personnel and benefit costs.

OTHER HIGHLIGHTS
  • Debt increased $4.7 million during the quarter to $270.5 million, with the Company’s funded debt (notes payable) to equity ratio decreasing from 0.88 to 1 at March 31, 2011 to 0.87 to 1 at June 30, 2011. As of June 30, 2011, the Company had capacity to borrow an additional $184.5 million under its lines of credit.
  • New senior notes issued April 21, 2011. The Company entered into an agreement for the issuance of $100 million of 4.03% unsecured senior notes. The debt has a five-year average life with a final maturity in April 2018. Proceeds from the offering were used to repay outstanding borrowings under the Company’s revolving credit facilities.
  • Dividend rate increased 2% to $0.23 per share for the second quarter 2011 compared to the second quarter 2010. On an annualized basis, this dividend represents a 3.6% yield on the August 3, 2011 close price of $25.62.
  • Adjusted EBITDA increased 28% to $38.3 million for the second quarter of 2011. At June 30, 2011, the Company’s ratio of funded debt to the last twelve months actual Adjusted EBITDA was 1.85 to 1 compared to 1.93 to 1 at March 31, 2011. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and other non-cash stock-based compensation. A reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.

You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K and 10-Q and other SEC filings. You can visit the Company’s web site at www.mgrc.com to access information on McGrath RentCorp, including the latest Forms 10-K and 10-Q and other SEC filings.

FINANCIAL GUIDANCE

Given the Company’s solid results during the first half of the year and encouraging signs for further growth in rental and sales revenues in 2011, the Company is revising its previous 2011 full-year guidance range of $1.52 to $1.62 to an updated range of $1.65 to $1.75 per diluted share.

For the full year of 2011, the Company expects approximately 13% to 14% growth in rental revenues compared to 2010 and approximately 15% higher sales revenues. Rental revenue growth is expected from Adler Tanks and TRS-RenTelco, and sales growth is expected primarily from Enviroplex. Rental equipment depreciation expense is expected to increase to $59 to $60 million, driven by rental fleet growth. Selling and administrative costs are expected to increase to approximately $77 to $79 million to support business growth, continued investment in Adler Tanks and our Portable Storage initiative, and removal of employee cost austerity measures in place throughout 2010. Full year interest expense is forecasted to be approximately $8 million. The Company expects the 2011 effective tax rate to be 39.2%. Earnings are expected to peak in the third quarter and then decrease in the fourth quarter due to year-end seasonality at Adler Tanks and TRS-RenTelco.

These forward-looking statements reflect McGrath RentCorp’s expectations as of August 4, 2011. Actual 2011 full-year earnings per share results may be materially different and affected by many factors, including those factors outlined in the “forward-looking statements” paragraph at the end of this press release.

ABOUT MCGRATH RENTCORP

Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company. Under the trade name Mobile Modular Management Corporation (Mobile Modular), it rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs in California, Texas, Florida, and the Mid-Atlantic from Washington D.C. to Georgia. The Company’s TRS-RenTelco division rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas. In 2008, the Company purchased the assets of Adler Tank Rentals, a New Jersey based supplier of rental containment solutions for hazardous and nonhazardous liquids and solids with operations today serving key markets throughout the U.S. Also, in 2008, under the trade name TRS-Environmental, the Company entered the environmental test equipment rental business serving the Americas. In 2008, the Company also entered the portable storage container rental business in California under the trade name Mobile Modular Portable Storage, and in 2009 expanded this business into Texas and Florida. For more information on McGrath RentCorp and its operating units, please visit our websites:

Corporate – www.mgrc.comTanks and Boxes – www.AdlerTankRentals.comModular Buildings – www.MobileModularRents.comPortable Storage – www.MobileModularRents-PortableStorage.comElectronic Test Equipment – www.TRS-RenTelco.comEnvironmental Test Equipment – www.TRS-Environmental.comSchool Facilities Manufacturing – www.Enviroplex.com

CONFERENCE CALL NOTE

As previously announced in its press release of July 14, 2011, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on August 4, 2011 to discuss the second quarter 2011 results. To participate in the teleconference, dial 1-877-941-8416 (in the U.S.), or 1-480-629-9808 (outside the US), or visit the investor relations section of the Company’s website at www.mgrc.com. Telephone replay of the call will be available for 7 days following the call by dialing 1-800-406-7325 (in the U.S.), or 1-303-590-3030 (outside the U.S.). The pass code for the call replay is 4456803.

FORWARD-LOOKING STATEMENTS

Statements in this press release which are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, regarding McGrath RentCorp’s business strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, plans and objectives are forward looking statements. These forward-looking statements appear in a number of places and can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “hopes,” “goals” or “certain” or the negative of these terms or other variations or comparable terminology. In particular, the statements made in this press release about the following topics are forward looking statements: uncertainty in the California modular market, the growth potential of Adler Tank Rentals and our portable storage initiative, and the statements under the heading “Financial Guidance.”

Management cautions that forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements including, without limitation, the following: the continuation of the current recession and financial, budget and credit crises, particularly in California, including the impact on funding for school facility projects and residential and commercial construction sectors, our customers’ need and ability to rent our products, and the Company’s ability to access additional capital in the current uncertain capital and credit market; changes in state funding for education and the timing and impact of federal stimulus monies; the effectiveness of management’s strategies and decisions, general economic, stock market and business conditions, including in the states and countries where we sell or rent our products; continuing demand for our products; hiring, retention and motivation of key personnel; failure by third parties to manufacture and deliver our products in a timely manner and to our specifications; the cost of and our ability to successfully implement information system upgrades; our ability to finance expansion and to locate and consummate acquisitions and to successfully integrate and operate Adler Tanks and other acquisitions; fluctuations in interest rates and the Company’s ability to manage credit risk; our ability to effectively manage our rental assets; the risk that we may be subject to litigation under environmental, health and safety and product liability laws and claims from employees, vendors and other third parties; fluctuations in the Company’s effective tax rate; changes in financial accounting standards; our failure to comply with internal control requirements; catastrophic loss to our facilities; effect on the Company’s Adler Tanks business from reductions to the price of oil or gas; new or modified statutory or regulatory requirements; success of the Company’s strategic growth initiatives; risks associated with doing business with government entities; seasonality of our businesses; intense industry competition including increasing price pressure; our ability to timely deliver, install and redeploy our rental products; significant increases in raw materials, labor, and other costs; and risks associated with operating internationally, including unfavorable exchange rates for the U.S. dollar against our Canadian dollar denominated revenues.

Our future business, financial condition and results of operations could differ materially from those anticipated by such forward-looking statements and are subject to risks and uncertainties including the risks set forth above, those discussed in Part II—Item 1A “Risk Factors” and elsewhere in our Form 10-Q for the quarter ended June 30, 2011 filed with the SEC on August 4, 2011 and in our Form 10-K for the year ended December 31, 2010 filed with the SEC on February 25, 2011, and those that may be identified from time to time in our reports and registration statements filed with the SEC. Forward-looking statements are made only as of the date of this press release and are based on management’s reasonable assumptions; however, these assumptions can be wrong or affected by known or unknown risks and uncertainties. Readers should not place undue reliance on these forward-looking statements and are cautioned that any such forward-looking statements are not guarantees of future performance. Except as otherwise required by law, we do not undertake any duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results or to changes in our expectations.

   
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)
             
 

Three Months Ended June 30,

Six Months Ended June 30,
(in thousands, except per share amounts)   2011   2010   2011   2010
 

REVENUES
Rental $ 57,118 $ 47,851 $ 111,144 $ 92,984
Rental Related Services   9,387   8,201   17,879   15,317
Rental Operations 66,505 56,052 129,023 108,301
Sales 12,489 9,958 22,423 18,895
Other   536   513   1,057   1,057
Total Revenues   79,530   66,523   152,503   128,253
 

COSTS AND EXPENSES
Direct Costs of Rental Operations
Depreciation of Rental Equipment 14,842 13,786 29,437 27,556
Rental Related Services 7,139 6,060 13,880 11,386
Other   10,665   9,777   20,205   18,749
Total Direct Costs of Rental Operations 32,646 29,623 63,522 57,691
Costs of Sales   7,525   6,372   13,770   12,252
Total Costs of Revenues   40,171   35,995   77,292   69,943
Gross Profit 39,359 30,528 75,211 58,310
Selling and Administrative Expenses   18,645   16,949   37,203   32,360
Income from Operations 20,714 13,579 38,008 25,950
Interest Expense   1,954   1,506   3,436   3,015
Income Before Provision for Income Taxes 18,760 12,073 34,572 22,935
Provision for Income Taxes   7,354   4,685   13,552   8,899
Net Income $ 11,406 $ 7,388 $ 21,020 $ 14,036
 
Earnings Per Share:
Basic $ 0.47 $ 0.31 $ 0.87 $ 0.59
Diluted $ 0.46 $ 0.31 $ 0.85 $ 0.58
Shares Used in Per Share Calculation:
Basic 24,341 23,924 24,300 23,866
Diluted 24,743 24,201 24,700 24,136
 
Cash Dividends Declared Per Share   $ 0.230   $ 0.225   $ 0.460   $ 0.450

 
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
  June 30,   December 31,
(in thousands)   2011   2010
 
ASSETS
Cash $ 437 $ 990
Accounts Receivable, net of allowance for doubtful
accounts of $1,700 in 2011 and 2010 78,830 76,488
Income Taxes Receivable 6,131
 
Rental Equipment, at cost:
Relocatable Modular Buildings 529,056 514,548
Electronic Test Equipment 260,563 250,125
Liquid and Solid Containment Tanks and Boxes   159,756     133,095  
949,375 897,768
Less Accumulated Depreciation   (316,857 )   (306,188 )
Rental Equipment, net   632,518     591,580  
 
Property, Plant and Equipment, net 91,908 83,861
Prepaid Expenses and Other Assets 22,765 13,944
Intangible Assets, net 12,542 12,868
Goodwill   27,700     27,700  
Total Assets $ 866,700   $ 813,562  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes Payable $ 270,500 $ 265,640
Accounts Payable and Accrued Liabilities 66,238 49,612
Deferred Income 30,981 23,790
Deferred Income Taxes, net   189,659     179,543  
Total Liabilities   557,378     518,585  
 
Shareholders’ Equity:
Common Stock, no par value -
Authorized -- 40,000 shares
Issued and Outstanding -- 24,361 shares in 2011 and
24,235 shares in 2010 68,217 63,623
Retained Earnings   241,105     231,354  
Total Shareholders’ Equity   309,322     294,977  
Total Liabilities and Shareholders’ Equity $ 866,700   $ 813,562  
         

 
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
Six Months Ended June 30,
(in thousands) 2011   2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 21,020 $ 14,036
Adjustments to Reconcile Net Income to Net Cash Provided

by Operating Activities:
Depreciation and Amortization 32,636 30,588
Provision for Doubtful Accounts 825 844
Non-Cash Stock-Based Compensation 2,127 2,086
Gain on Sale of Rental Equipment (6,496 ) (4,745 )
Change In:
Accounts Receivable (3,167 ) 342
Income Taxes Receivable 6,131 5,075
Prepaid Expenses and Other Assets (8,821 ) (1,487 )
Accounts Payable and Accrued Liabilities 9,887 2,900
Deferred Income 7,191 (3,967 )
Deferred Income Taxes   10,116     (2,519 )
Net Cash Provided by Operating Activities   71,449     43,153  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Rental Equipment (71,160 ) (59,207 )
Purchase of Property, Plant and Equipment (10,828 ) (3,554 )
Proceeds from Sale of Used Rental Equipment   13,703     10,965  
Net Cash Used in Investing Activities   (68,285 )   (51,796 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Payments) Under Bank Lines of Credit (83,140 ) 28,166
Borrowings Under Private Placement 100,000
Principal Payments on Senior Notes (12,000 ) (12,000 )
Proceeds from the Exercise of Stock Options 1,770 2,087

Excess Tax Benefit from Exercise and Disqualifying Disposition of Stock Options

696

352
Payment of Dividends   (11,043 )   (10,616 )
Net Cash Provided by (Used in) Financing Activities   (3,717 )   7,989  
 
Net Decrease in Cash (553 ) (654 )
Cash Balance, beginning of period   990     1,187  
Cash Balance, end of period $ 437   $ 533  
 
Interest Paid, during the period $ 2,658   $ 3,138  
Income Taxes Paid (Refunds Received), during the period $ (3,598 ) $ 6,199  
Dividends Declared, not yet paid $ 5,605   $ 5,414  
Rental Equipment Acquisitions, not yet paid $ 11,812   $ 9,789  
       

         

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Three Months Ended June 30, 2011

 

(dollar amounts in thousands)
 

MobileModular
 

TRS-RenTelco
 

AdlerTanks
 

Enviroplex
 

Consolidated

Revenues
Rental $ 19,791 $ 23,553 $ 13,774 $ $ 57,118
Rental Related Services   5,781       785       2,821             9,387
Rental Operations 25,572 24,338 16,595 66,505
Sales 4,163 6,421 1,905 12,489
Other   107       391       38             536
Total Revenues   29,842       31,150       16,633       1,905       79,530
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 3,430 9,445 1,967 14,842
Rental Related Services 4,457 657 2,025 7,139
Other   5,987       3,576       1,102             10,665
Total Direct Costs of Rental Operations 13,874 13,678 5,094 32,646
Costs of Sales   2,892       3,285             1,348       7,525
Total Costs of Revenue   16,766       16,963       5,094       1,348       40,171
 

Gross Profit
Rental 10,374 10,532 10,705 31,611
Rental Related Services   1,324       128       796             2,248
Rental Operations 11,698 10,660 11,501 33,859
Sales 1,271 3,136 557 4,964
Other   107       391       38             536
Total Gross Profit 13,076 14,187 11,539 557 39,359
Selling and Administrative Expenses   7,842       6,272       3,713       818       18,645
Income (Loss) from Operations $ 5,234     $ 7,915     $ 7,826     $ (261 ) 20,714
Interest Expense 1,954
Provision for Income taxes   7,354
Net Income $ 11,406
 

Other Information
Average Rental Equipment 1 $ 499,984 $ 255,741 $ 148,022
Average Monthly Total Yield 2 1.32 % 3.07 % 3.10 %
Average Utilization 3 67.4 % 65.6 % 85.8 %
Average Monthly Rental Rate 4 1.96 % 4.68 % 3.62 %
                                 
1   Average Rental Equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average Rental Equipment also excludes new equipment inventory.
2 Average Monthly Total Yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.
3 Average Utilization is calculated by dividing the cost of Average Rental Equipment on rent by the total cost of Average Rental Equipment.
4 Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

         

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Three Months Ended June 30, 2010

 

(dollar amounts in thousands)
 

MobileModular
 

TRS-RenTelco
 

AdlerTanks
 

Enviroplex
 

Consolidated

Revenues
Rental $ 20,418 $ 19,812 $ 7,621 $ $ 47,851
Rental Related Services   5,333       518       2,350             8,201
Rental Operations 25,751 20,330 9,971 56,052
Sales 4,056 4,951 8 943 9,958
Other   120       380       13             513
Total Revenues   29,927       25,661       9,992       943       66,523
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 3,424 9,083 1,279 13,786
Rental Related Services 3,690 563 1,807 6,060
Other   5,745       3,109       923             9,777
Total Direct Costs of Rental Operations 12,859 12,755 4,009 29,623
Costs of Sales   3,162       2,807       6       397       6,372
Total Costs of Revenues   16,021       15,562       4,015       397       35,995
 

Gross Profit (Loss)
Rental 11,249 7,620 5,419 24,288
Rental Related Services   1,643       (45 )     543             2,141
Rental Operations 12,892 7,575 5,962 26,429
Sales 894 2,144 2 546 3,586
Other   120       380       13             513
Total Gross Profit 13,906 10,099 5,977 546 30,528
Selling and Administrative Expenses   7,254       6,057       2,990       648       16,949
Income (Loss) from Operations $ 6,652     $ 4,042     $ 2,987     $ (102 ) 13,579
Interest Expense 1,506
Provision for Income taxes   4,685
Net Income $ 7,388
 

Other Information
Average Rental Equipment 1 $ 488,754 $ 241,545 $ 93,414
Average Monthly Total Yield 2 1.39 % 2.73 % 2.72 %
Average Utilization 3 67.7 % 66.2 % 71.0 %
Average Monthly Rental Rate 4 2.06 % 4.13 % 3.83 %
                                 
1   Average Rental Equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average Rental Equipment also excludes new equipment inventory.
2 Average Monthly Total Yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.
3 Average Utilization is calculated by dividing the cost of Average Rental Equipment on rent by the total cost of Average Rental Equipment.
4 Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

         

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Six Months Ended June 30, 2011

 

(dollar amounts in thousands)
 

MobileModular
 

TRS-RenTelco
 

AdlerTanks
 

Enviroplex
 

Consolidated

Revenues
Rental $ 39,566 $ 45,611 $ 25,967 $ $ 111,144
Rental Related Services   11,321       1,402       5,156             17,879
Rental Operations 50,887 47,013 31,123 129,023
Sales 8,036 12,334 103 1,950 22,423
Other   205       785       67             1,057
Total Revenues   59,128       60,132       31,293       1,950       152,503
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 6,849 18,836 3,752 29,437
Rental Related Services 8,673 1,158 4,049 13,880
Other   11,390       6,575       2,240             20,205
Total Direct Costs of Rental Operations 26,912 26,569 10,041 63,522
Costs of Sales   5,787       6,562       75       1,346       13,770
Total Costs of Revenue   32,699       33,131       10,116       1,346       77,292
 

Gross Profit
Rental 21,327 20,200 19,975 61,502
Rental Related Services   2,648       244       1,107             3,999
Rental Operations 23,975 20,444 21,082 65,501
Sales 2,249 5,772 28 604 8,653
Other   205       785       67             1,057
Total Gross Profit 26,429 27,001 21,177 604 75,211
Selling and Administrative Expenses   15,599       12,606       7,317       1,681       37,203
Income (Loss) from Operations $ 10,830     $ 14,395     $ 13,860     $ (1,077 ) 38,008
Interest Expense 3,436
Provision for Income taxes   13,552
Net Income $ 21,020
 

Other Information
Average Rental Equipment 1 $ 498,661 $ 253,800 $ 141,141
Average Monthly Total Yield 2 1.32 % 3.00 % 3.07 %
Average Utilization 3 67.2 % 65.3 % 85.4 %
Average Monthly Rental Rate 4 1.97 % 4.59 % 3.59 %
                                 
1   Average Rental Equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average Rental Equipment also excludes new equipment inventory.
2 Average Monthly Total Yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.
3 Average Utilization is calculated by dividing the cost of Average Rental Equipment on rent by the total cost of Average Rental Equipment.
4 Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

         

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Six Months Ended June 30, 2010

 

(dollar amounts in thousands)
 

MobileModular
 

TRS-RenTelco
 

AdlerTanks
 

Enviroplex
 

Consolidated

Revenues
Rental $ 41,006 $ 38,319 $ 13,659 $ $ 92,984
Rental Related Services   10,259       1,039       4,019             15,317
Rental Operations 51,265 39,358 17,678 108,301
Sales 5,943 9,834 27 3,091 18,895
Other   218       814       25             1,057
Total Revenues   57,426       50,006       17,730       3,091       128,253
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 6,852 18,330 2,374 27,556
Rental Related Services 7,258 960 3,168 11,386
Other   10,831       5,996       1,922             18,749
Total Direct Costs of Rental Operations 24,941 25,286 7,464 57,691
Costs of Sales   4,410       5,946       27       1,869       12,252
Total Costs of Revenue   29,351       31,232       7,491       1,869       69,943
 

Gross Profit
Rental 23,323 13,993 9,363 46,679
Rental Related Services   3,001       79       851             3,931
Rental Operations 26,324 14,072 10,214 50,610
Sales 1,533 3,888 1,222 6,643
Other   218       814       25             1,057
Total Gross Profit 28,075 18,774 10,239 1,222 58,310
Selling and Administrative Expenses   13,904       11,453       5,664       1,339       32,360
Income (Loss) from Operations $ 14,171     $ 7,321     $ 4,575     $ (117 ) 25,950
Interest Expense 3,015
Provision for Income taxes   8,899
Net Income $ 14,036
 

Other Information
Average Rental Equipment 1 $ 487,688 $ 240,526 $ 86,699
Average Monthly Total Yield 2 1.40 % 2.66 % 2.63 %
Average Utilization 3 67.9 % 65.3 % 70.1 %
Average Monthly Rental Rate 4 2.06 % 4.07 % 3.75 %
                     
1   Average Rental Equipment represents the cost of rental equipment excluding accessory equipment. For Mobile Modular and Adler Tanks, Average Rental Equipment also excludes new equipment inventory.
2 Average Monthly Total Yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment, for the period.
3 Average Utilization is calculated by dividing the cost of Average Rental Equipment on rent by the total cost of Average Rental Equipment.
4 Average Monthly Rental Rate is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment on rent, for the period.

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 to 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 generally accepted accounting principles in the United States 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 Securities and Exchange Commission, 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 MonthsEnded June 30,

Six MonthsEnded June 30,

Twelve MonthsEnded June 30,
2011   2010 2011   2010 2011   2010
Net Income $ 11,406 $ 7,388 $ 21,020 $ 14,036 $ 43,462 $ 32,467
Provision for Income Taxes 7,354 4,685 13,552 8,899 27,224 19,985
Interest   1,954     1,506     3,436     3,015     6,607     6,284  
Income from Operations 20,714 13,579 38,008 25,950 77,293 58,736
Depreciation and Amortization 16,462 15,332 32,636 30,588 64,624 61,678
Non-Cash Stock-Based Compensation   1,103     1,067     2,127     2,086     4,268     3,736  
Adjusted EBITDA 1 $ 38,279   $ 29,978   $ 72,771   $ 58,624   $ 146,185   $ 124,150  
 
Adjusted EBITDA Margin 2 48 % 45 % 48 % 46 % 46 % 46 %
                                                 

     

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
(dollar amounts in thousands)

Three Months EndedJune 30,

Six Months EndedJune 30,

Twelve Months EndedJune 30,
2011   2010 2011   2010 2011   2010
Adjusted EBITDA 1 $ 38,279 $ 29,978 $ 72,771 $ 58,624 $ 146,185 $ 124,150
Interest Paid (1,323 ) (1,919 ) (2,658 ) (3,138 ) (5,826 ) (6,375 )
Net Income Taxes Paid (1,469 ) (4,807 ) (2,533 ) (5,967 ) (5,908 ) (7,049 )
Gain on Sale of Used Rental Equipment (3,441 ) (2,577 ) (6,496 ) (4,745 ) (13,479 ) (10,435 )
Change in certain assets and liabilities:
Accounts Receivable, net (3,907 ) (6,370 ) (2,342 ) 1,186 (9,419 ) (2,655 )
Income Taxes Receivable 5,075 6,131 5,075 1,176 5,075
Prepaid Expenses and Other Assets (5,878 ) (3,401 ) (8,821 ) (1,487 ) (7,039 ) 1,786
Accounts Payable and Other Liabilities 11,119 (2,808 ) 8,206 (2,428 ) 12,999 (5,359 )
Deferred Income   2,670     1,412     7,191  

 
(3,967 )   10,204     423  
Net Cash Provided by Operating Activities $ 36,050   $ 14,583   $ 71,449   $ 43,153   $ 128,893   $ 99,561  

 
                                               
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.

Copyright Business Wire 2010

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