McGrath RentCorp Announces Results For Fourth Quarter 2012

McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business to business rental company, today announced revenues for the quarter ended December 31, 2012 of $102.0 million, an increase of 20%, compared to $85.2 million in the fourth quarter of 2011. The Company reported net income of $11.9 million, or $0.47 per diluted share for the fourth quarter of 2012, compared to net income of $13.2 million, or $0.53 per diluted share, in the fourth quarter of 2011.

Total revenues for the year ended December 31, 2012 were $364.1 million, compared to $342.7 million in 2011. Rental revenues increased 6% to $248.4 million in 2012 compared to $234.9 million in 2011. Net income for the year ended December 31, 2012 decreased 10% to $44.8 million, compared to net income of $49.6 million in the prior year. Diluted earnings per share decreased 11% to $1.78 in 2012 from $2.00 in 2011.

The Company also announced that the board of directors declared a quarterly cash dividend of $0.24 per share for the quarter ending March 31, 2013, an increase of 2% over the prior year period. On an annualized basis, the 2013 dividend represents a 3.3% yield, based on the February 20, 2013 closing stock price. The cash dividend will be payable on April 30, 2013 to all shareholders of record on April 16, 2013.

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

“Although Company-wide rental revenues increased by 4% from a year ago, we had an 11% decrease in EPS for the quarter. This is primarily the result of lower rental revenues for Adler relative to its current cost structure. While Adler rental revenues grew over last year’s fourth quarter by approximately 6%, its income from operations declined by approximately 39%. Over the past year we have executed on ramping our tank rental business’s national footprint to support higher rental revenue and earnings levels in the years ahead. These costs are primarily related to filling management, sales, office and inventory center positions, facilities and winch / roll-off tractor infrastructure. This is all by design. Adler’s profitability was also impacted negatively during the quarter by $1.3 million higher bad debt write-offs from a year ago. Finally, we also experienced $0.7 million higher expenses during the quarter from a year ago in moving underutilized equipment from the dry gas Marcellus region to other Adler geographies in need of equipment. We have now completed the great majority of these interregional asset movements and we anticipate this expense category will be materially lower in 2013. Adler’s average rental equipment utilization for the fourth quarter 2012 stood at 69.9% compared to 86.8% a year ago, and 68.9% in the third quarter 2012. Our percentage of overall rental revenue derived from E&P gas and oil fracking declined from a high of approximately 35% in 2011, to 15% in the fourth quarter of 2012, and at the same time rental revenues grew by 6%. We have a great tank rental business, but not without some growing pains. What’s most important is that Adler is making very good headway in establishing its brand name, high quality products and exceptional customer experiences over an increasingly larger geography and customer base, quarter after quarter.

TRS-RenTelco, our electronic test equipment division, rental revenues for the quarter increased by $1.5 million, or 6% to $26.8 million from a year ago. Divisional income from operations increased by 18% from the fourth quarter of 2011. The significantly higher percentage increase in profitability as compared to rental revenues was chiefly related to lower SG&A, laboratory and equipment depreciation expenses all as a percentage of rental revenues from a year ago. Our results for TRS-RenTelco continue to reflect its discipline in strategic focus, strong brand following, operational efficiencies and an exceptionally talented and tenured work force.

Modular division rental revenues for the quarter were relatively flat at $20.1 million compared to $20.3 million a year ago, and $20.0 million from the third quarter 2012. Rental revenues grew by 9% quarter over quarter in our markets outside of California and declined by 9% within the state. Modular rental revenues outside of California now represent approximately 47% of total modular rental revenues. First month’s rental bookings for the modular division increased 26% from a year ago with bookings outside of California increasing 89% and declining by 15% within the state. Although our California modular results continue to be depressed due to macroeconomic headwinds, there are a number of positive indicators going forward. These bright spots include the successful November 2012 personal income and sales taxes ballot initiative and its anticipated impact on reversing public education austerity; a December 2012 statewide unemployment rate of 9.8% down from a Great Recession high of 12.6%; scarce inventory of existing homes for sale in some regions as market prices begin to increase; and a marked pick-up in both non-residential and residential construction.

Modular division quarter over quarter income from operations decreased by approximately 8% to $5.6 million from $6.1 million in 2011; however, modular division gross profit was up slightly to $14.4 million compared to $14.2 million a year ago, and from $13.2 million in the third quarter of 2012. First, the higher percentage reduction in income from operations relative to flat rental revenues for the quarter is primarily due to an increase in bad debt expense, and secondarily to increased SG&A costs in our portable storage business. The increase in gross profit for the fourth quarter over the third quarter 2012 relates chiefly to lower inventory center costs incurred. Finally, average utilization for the fourth quarter 2012 was 66.8%, down slightly from 67.1% a year ago, however, up from 66.2% in the third quarter 2012.

Our portable storage business continued to make good progress during the quarter in building its customer following, increasing booking levels and growing rental revenues. The business achieved both its full year rental revenue and profitability goals for 2012. Turning the corner into 2013, our portable storage business has strong momentum and we are excited about its long-term prospects in becoming a meaningfully sized business and a material contributor to McGrath RentCorp’s earnings.

In 2012, we added a net $74 million in original cost of rental assets. These rental products were primarily for the growth of Adler Tank Rentals, and for our test equipment and portable storage businesses. During the year we also paid out $23 million in shareholder dividends. Finally, we invested $14 million in property, plant and equipment expenditures, primarily for the growth of Adler Tank Rentals; yet, our year ending notes payable only rose by approximately $5 million, and we carried a 1.91 to 1 ratio of funded debt (notes payable) to last twelve months actual adjusted EBITDA . Strong cash flows and a low-leveraged balance sheet matter greatly towards the financial strength, opportunity nimbleness, and overall shareholder returns of McGrath RentCorp.”

All comparisons presented below are for the quarter ended December 31, 2012 to the quarter ended December 31, 2011 unless otherwise indicated.

MOBILE MODULAR

For the fourth quarter of 2012, the Company’s Mobile Modular division reported an 8% decrease in income from operations to $5.6 million. Rental revenues decreased 1% to $20.1 million and other direct costs increased 16% to $5.4 million, which resulted in a decrease in gross profit on rental revenues of 8% to $11.2 million. Sales revenues increased 12% to $4.1 million, with gross profit on sales revenues increasing 13% to $1.0 million, primarily due to higher new and used equipment sales revenues in the fourth quarter of 2012. Selling and administrative expenses increased 8% to $8.7 million primarily as a result of higher bad debt expense and higher salary and benefit costs, primarily related to the expansion of our Portable Storage growth initiative.

TRS-RENTELCO

For the fourth quarter of 2012, the Company’s TRS-RenTelco division reported an 18% increase in income from operations to $10.1 million. Rental revenues increased 6% to $26.8 million. The increase in rental revenues together with a 3% decrease in other direct costs to $3.3 million, partly offset by a 4% increase in depreciation expense to $9.9 million, resulted in an increase in gross profit on rental revenues of 10% to $13.7 million. Sales revenues increased 42% to $10.1 million with gross profit on sales flat at $2.8 million, due to lower margins on used equipment sales revenues in the fourth quarter of 2012, which included $3.7 million in proceeds from the sale of the TRS-Environmental product line at a loss of $0.4 million. Selling and administrative expenses decreased 3% to $6.8 million, primarily due to decreased salary and benefit costs.

ADLER TANKS

For the fourth quarter of 2012, the Company’s Adler Tanks division reported a 39% decrease in income from operations to $5.9 million. Rental revenues increased 6% to $18.2 million and other direct costs more than doubled to $3.0 million, which resulted in a decrease in gross profit on rental revenues of 11% to $11.9 million. Rental related services revenues increased $1.2 million to $5.0 million, with gross profit on rental related services revenues decreasing $0.6 million to $0.6 million. Selling and administrative expenses increased 35% to $6.8 million, primarily due to higher bad debt expenses and higher personnel and benefit costs.

OTHER HIGHLIGHTS
  • Debt decreased $12.2 million during the quarter to $302.0 million, with the Company’s funded debt (notes payable) to equity ratio decreasing from 0.88 to 1 at September 30, 2012 to 0.83 to 1 at December 31, 2012. As of December 31, 2012, the Company had capacity to borrow an additional $228.0 million under its lines of credit.
  • Dividend rate increased 2% to $0.235 per share for the fourth quarter 2012 compared to the fourth quarter 2011. On an annualized basis, this dividend represents a 3.2% yield on the February 20, 2013 close price of $29.23.
  • Adjusted EBITDA decreased 4% to $40.6 million for the fourth quarter of 2012. At December 31, 2012, the Company’s ratio of funded debt to the last twelve months actual Adjusted EBITDA was 1.91 to 1 compared to 1.96 to 1 at September 30, 2012. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and 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

The Company expects 2013 full-year earnings per share to be in a range of $1.85 to $1.95 per diluted share.

For the full-year 2013, the Company expects 4% to 7% growth in rental operations revenues over 2012. Sales revenue is expected to be approximately 10% lower than 2012, but gross profit from sales is expected to be comparable to 2012. Rental equipment depreciation expense is expected to increase to between $67 and $69 million, driven by rental fleet growth. Selling and administrative costs are expected to increase to between $89 and $91 million to support business growth, and continued investment in Adler Tanks and our portable storage initiative. Full year interest expense is expected to be approximately $9 million. The Company expects the 2013 effective tax rate to be 39.2% and the diluted share count to increase to between 25.3 and 25.7 million shares. These forward-looking statements reflect McGrath RentCorp’s expectations as of February 21, 2013. Actual 2013 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. The Company’s Mobile Modular division 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. The Company’s New Jersey based Adler Tank Rentals subsidiary rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations today serving key markets throughout the United States. In 2008, the Company 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.comSchool Facilities Manufacturing – www.Enviroplex.com

CONFERENCE CALL NOTE

As previously announced in its press release of January 24, 2013, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 21, 2013 to discuss the fourth quarter 2012 results. To participate in the teleconference, dial 1-877-941-1427 (in the U.S.), or 1-480-629-9664 (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 4584516.

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: higher rental revenues and earnings levels from Adler in the years ahead; lower expenses in 2013 attributable to moving underutilized equipment at Adler; positive indicators in the modular division, such as the successful California personal income and sales tax ballot initiatives, lower unemployment in California, scarce inventory of existing homes, and increases in construction; strong momentum and future growth in our portable storage business, 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-K for the year ended December 31, 2012, which is expected to be filed with the SEC on February 22, 2013, 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 EndedDecember 31,
 

Twelve Months EndedDecember 31,
(in thousands, except per share amounts)   2012   2011   2012   2011
   

REVENUES
Rental $ 65,117 $ 62,798 $ 248,444 $ 234,906
Rental Related Services   12,217   10,870   46,920   39,486
Rental Operations 77,334 73,668 295,364 274,392
Sales 24,126 11,176 66,444 66,382
Other   490   362   2,266   1,896
Total Revenues   101,950   85,206   364,074   342,670
 

COSTS AND EXPENSES
Direct Costs of Rental Operations
Depreciation of Rental Equipment 16,583 15,393 63,819 60,187
Rental Related Services 9,391 8,491 37,207 30,692
Other   11,725   9,380   45,581   39,859
Total Direct Costs of Rental Operations 37,699 33,264 146,607 130,738
Costs of Sales   20,212   7,749   49,173   45,141
Total Costs of Revenues   57,911   41,013   195,780   175,879
Gross Profit 44,039 44,193 168,294 166,791
Selling and Administrative Expenses   22,906   20,843   86,278   78,127
Income from Operations 21,133 23,350 82,016 88,664
Interest Expense   2,282   2,119   9,149   7,606
Income Before Provision for Income Taxes 18,851 21,231 72,867 81,058
Provision for Income Taxes   6,915   8,004   28,090   31,456
Net Income $ 11,936 $ 13,227 $ 44,777 $ 49,602
 
Earnings Per Share:
Basic $ 0.48 $ 0.54 $ 1.80 $ 2.04
Diluted $ 0.47 $ 0.53 $ 1.78 $ 2.00
Shares Used in Per Share Calculation:
Basic 24,847 24,431 24,759 24,349
Diluted 25,216 24,892 25,157 24,760
 
Cash Dividends Declared Per Share $ 0.235 $ 0.230 $ 0.940 $ 0.920
                         
 

MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
  December 31,   December 31,
(in thousands)     2012       2011  
 

ASSETS
Cash $ 1,612 $ 1,229

Accounts Receivable, net of allowance for doubtful accounts of $3,000 in 2012 and $1,500 in 2011
92,256 92,671
 
Rental Equipment, at cost:
Relocatable Modular Buildings 551,101 539,147
Electronic Test Equipment 266,934 258,586
Liquid and Solid Containment Tanks and Boxes   254,810     201,456  
1,072,845 999,189
Less Accumulated Depreciation   (353,992 )   (326,043 )
Rental Equipment, net   718,853     673,146  
 
Property, Plant and Equipment, net 101,031 94,702
Prepaid Expenses and Other Assets 19,507 17,170
Intangible Assets, net 11,487 12,311
Goodwill   27,700     27,700  
Total Assets $ 972,446   $ 918,929  
 

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes Payable $ 302,000 $ 296,500
Accounts Payable and Accrued Liabilities 52,220 58,854
Deferred Income 26,924 25,067
Deferred Income Taxes, net   226,564     205,366  
Total Liabilities   607,708     585,787  
 
Shareholders’ Equity:
Common Stock, no par value -
Authorized - 40,000 shares

Issued and Outstanding - 24,931 shares as of December 31, 2012 and 24,576 shares as of December 31, 2011
85,342 74,878
Retained Earnings   279,396     258,264  
Total Shareholders’ Equity   364,738     333,142  
Total Liabilities and Shareholders’ Equity $ 972,446   $ 918,929  
         
 

MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
  Year Ended December 31,
(in thousands)     2012       2011  
 

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 44,777 $ 49,602

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization 72,476 67,395
Provision for Doubtful Accounts 4,263 1,755
Non-Cash Stock-Based Compensation 3,840 5,221
Gain on Sale of Used Rental Equipment (12,389 ) (12,444 )
Change In:
Accounts Receivable (3,848 ) (17,938 )
Income Taxes Receivable 6,131
Prepaid Expenses and Other Assets (2,337 ) (3,226 )
Accounts Payable and Accrued Liabilities (3,456 ) 5,715
Deferred Income 1,857 1,277
Deferred Income Taxes   21,198     25,823  
Net Cash Provided by Operating Activities   126,381     129,311  
 

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Rental Equipment (131,805 ) (154,963 )
Purchase of Property, Plant and Equipment (14,161 ) (17,204 )
Proceeds from Sale of Used Rental Equipment   30,970     28,453  
Net Cash Used in Investing Activities   (114,996 )   (143,714 )
 

CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) Under Bank Lines of Credit 5,500 (57,140 )
Borrowings Under Private Placement 100,000
Principal Payments on Senior Notes (12,000 )
Proceeds from the Exercise of Stock Options 5,591 5,054

Excess Tax Benefit from Exercise and Disqualifying Disposition of Stock Options

1,033

980
Payment of Dividends   (23,126 )   (22,252 )
Net Cash Provided by (Used in) Financing Activities   (11,002 )   14,642  
 
Net Increase in Cash 383 239
Cash Balance, beginning of period   1,229     990  
Cash Balance, end of period $ 1,612   $ 1,229  
 
Interest Paid, during the period $ 9,107   $ 6,877  
Net Income Taxes Paid (Refunds Received), during the period $ 5,842   $ (1,480 )
Dividends Accrued During the period, not yet paid $ 6,194   $ 5,952  
Rental Equipment Acquisitions, not yet paid $ 4,491   $ 8,186  
                 
 

MCGRATH RENTCORP

BUSINESS SEGMENT DATA (unaudited)

Three Months Ended December 31, 2012

 

(dollar amounts in thousands)
  Mobile Modular   TRS-RenTelco   Adler Tanks  

Enviroplex
 

Consolidated

Revenues
         
Rental $ 20,104 $ 26,849 $ 18,164 $ $ 65,117
Rental Related Services   6,348       842       5,027             12,217
Rental Operations 26,452 27,691 23,191 77,334
Sales 4,077 10,100 32 9,917 24,126
Other   103       354       33             490
Total Revenues   30,632       38,145       23,256       9,917       101,950
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 3,505 9,894 3,184 16,583
Rental Related Services 4,246 758 4,387 9,391
Other   5,409       3,274       3,042             11,725
Total Direct Costs of Rental Operations 13,160 13,926 10,613 37,699
Costs of Sales   3,109       7,338       38       9,727       20,212
Total Costs of Revenue   16,269       21,264       10,651       9,727       57,911
 

Gross Profit (Loss)
Rental 11,190 13,681 11,938 36,809
Rental Related Services   2,102       84       640             2,826
Rental Operations 13,292 13,765 12,578 39,635
Sales 968 2,762 (6 ) 190 3,914
Other   103       354       33             490
Total Gross Profit 14,363 16,881 12,605 190 44,039
Selling and Administrative Expenses   8,715       6,753       6,754       684       22,906
Income (Loss) from Operations $ 5,648     $ 10,128     $ 5,851     $ (494 ) 21,133
Interest Expense 2,282
Provision for Income taxes   6,915
Net Income $ 11,936
 

Other Information
Average Rental Equipment 1 $ 532,282 $ 270,505 $ 244,160
Average Monthly Total Yield 2 1.26 % 3.31 % 2.48 %
Average Utilization 3 66.8 % 65.4 % 69.9 %
Average Monthly Rental Rate 4 1.88 % 5.06 % 3.54 %
                                 
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 December 31, 2011

 

(dollar amounts in thousands)
  Mobile Modular   TRS-RenTelco   Adler Tanks  

Enviroplex
 

Consolidated

Revenues
         
Rental $ 20,280 $ 25,324 $ 17,194 $ $ 62,798
Rental Related Services   6,177       860       3,833             10,870
Rental Operations 26,457 26,184 21,027 73,668
Sales 3,631 7,131 41 373 11,176
Other   111       208       43             362
Total Revenues   30,199       33,523       21,111       373       85,206
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 3,474 9,478 2,441 15,393
Rental Related Services 5,047 834 2,610 8,491
Other   4,677       3,370       1,333             9,380
Total Direct Costs of Rental Operations 13,198 13,682 6,384 33,264
Costs of Sales   2,778       4,333       161       477       7,749
Total Costs of Revenues   15,976       18,015       6,545       477       41,013
 

Gross Profit (Loss)
Rental 12,129 12,476 13,420 38,025
Rental Related Services   1,130       26       1,223             2,379
Rental Operations 13,259 12,502 14,643 40,404
Sales 853 2,798 (120 ) (104 ) 3,427
Other   111       208       43             362
Total Gross Profit (Loss) 14,223 15,508 14,566 (104 ) 44,193
Selling and Administrative Expenses   8,104       6,955       4,994       790       20,843
Income from Operations $ 6,119     $ 8,553     $ 9,572     $ (894 ) 23,350
Interest Expense 2,119
Provision for Income taxes   8,004
Net Income $ 13,227
 

Other Information
Average Rental Equipment 1 $ 512,757 $ 264,840 $ 184,365
Average Monthly Total Yield 2 1.32 % 3.19 % 3.11 %
Average Utilization 3 67.1 % 67.7 % 86.8 %
Average Monthly Rental Rate 4 1.96 % 4.71 % 3.58 %
                                 
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)

Twelve Months Ended December 31, 2012

 

(dollar amounts in thousands)
  Mobile Modular   TRS-RenTelco   Adler Tanks  

Enviroplex
 

Consolidated

Revenues
         
Rental $ 79,518 $ 101,645 $ 67,281 $ $ 248,444
Rental Related Services   25,775       3,673       17,472             46,920
Rental Operations 105,293 105,318 84,753 295,364
Sales 14,026 26,192 2,403 23,823 66,444
Other   448       1,663       155             2,266
Total Revenues   119,767       133,173       87,311       23,823       364,074
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 13,942 38,174 11,703 63,819
Rental Related Services 19,492 3,456 14,259 37,207
Other   23,735       13,811       8,035             45,581
Total Direct Costs of Rental Operations 57,169 55,441 33,997 146,607
Costs of Sales   10,576       15,649       2,157       20,791       49,173
Total Costs of Revenue   67,745       71,090       36,154       20,791       195,780
 

Gross Profit
Rental 41,841 49,660 47,543 139,044
Rental Related Services   6,283       217       3,213             9,713
Rental Operations 48,124 49,877 50,756 148,757
Sales 3,450 10,543 246 3,032 17,271
Other   448       1,663       155             2,266
Total Gross Profit 52,022 62,083 51,157 3,032 168,294
Selling and Administrative Expenses   34,032       26,068       22,101       4,077       86,278
Income (Loss) from Operations $ 17,990     $ 36,015     $ 29,056     $ (1,045 ) 82,016
Interest Expense 9,149
Provision for Income taxes   28,090
Net Income $ 44,777
 

Other Information
Average Rental Equipment 1 $ 524,084 $ 266,912 $ 223,673
Average Monthly Total Yield 2 1.26 % 3.18 % 2.51 %
Average Utilization 3 66.4 % 65.8 % 71.5 %
Average Monthly Rental Rate 4 1.90 % 4.83 % 3.50 %
                     
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)

Twelve Months Ended December 31, 2011

 

(dollar amounts in thousands)
  Mobile Modular   TRS-RenTelco   Adler Tanks  

Enviroplex
 

Consolidated

Revenues
         
Rental $ 79,969 $ 95,694 $ 59,243 $ $ 234,906
Rental Related Services   24,063       3,133       12,290           39,486
Rental Operations 104,032 98,827 71,533 274,392
Sales 20,152 25,164 278 20,788 66,382
Other   425       1,324       147           1,896
Total Revenues   124,609       125,315       71,958       20,788     342,670
 

Costs and Expenses
Direct Costs of Rental Operations:
Depreciation of Rental Equipment 13,780 38,039 8,368 60,187
Rental Related Services 18,835 2,848 9,009 30,692
Other   21,940       13,272       4,647           39,859
Total Direct Costs of Rental Operations 54,555 54,159 22,024 130,738
Costs of Sales   14,861       14,087       315       15,878     45,141
Total Costs of Revenue   69,416       68,246       22,339       15,878     175,879
 

Gross Profit
Rental 44,249 44,383 46,228 134,860
Rental Related Services   5,228       285       3,281           8,794
Rental Operations 49,477 44,668 49,509 143,654
Sales 5,291 11,077 (37 ) 4,910 21,241
Other   425       1,324       147           1,896
Total Gross Profit 55,193 57,069 49,619 4,910 166,791
Selling and Administrative Expenses   32,131       25,921       16,698       3,377     78,127
Income from Operations $ 23,062     $ 31,148     $ 32,921     $ 1,533 88,664
Interest Expense 7,606
Provision for Income taxes   31,456
Net Income $ 49,602
 

Other Information
Average Rental Equipment 1 $ 504,276 $ 258,995 $ 157,917
Average Monthly Total Yield 2 1.32 % 3.08 % 3.13 %
Average Utilization 3 67.1 % 66.0 % 86.2 %
Average Monthly Rental Rate 4 1.97 % 4.66 % 3.63 %
                                 
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 as well as 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 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 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 GAAP.
 

Reconciliation of Net Income to Adjusted EBITDA
(dollar amounts in thousands) Three Months Ended

December 31,
    Twelve Months Ended

December 31,
  2012       2011     2012       2011  
Net Income $ 11,936 $ 13,227 $ 44,777 $ 49,602
Provision for Income Taxes 6,915 8,004 28,090 31,456
Interest   2,282     2,119     9,149     7,606  
Income from Operations 21,133 23,350 82,016 88,664
Depreciation and Amortization 18,811 17,649 72,476 67,395
Non-Cash Stock-Based Compensation   686     1,512     3,840     5,221  
Adjusted EBITDA 1 $ 40,638   $ 42,511   $ 158,332   $ 161,280  
 
Adjusted EBITDA Margin 2 40 % 50 % 43 % 47 %
                 

     

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

December 31,
Twelve Months Ended

December 31,
  2012       2011     2012       2011  
Adjusted EBITDA 1 $ 40,630 $ 42,511 $ 158,332 $ 161,280
Interest Paid (3,253 ) (3,171 ) (9,107 ) (6,877 )
Net Income Taxes (Paid) Refund Received (1,209 ) (1,216 ) (5,842 ) 1,480
Gain on Sale of Rental Equipment (3,008 ) (2,731 ) (12,389 ) (12,444 )
Change in certain assets and liabilities:
Accounts Receivable, net 7,962 (3,030 ) (415 ) (16,183 )
Prepaid Expenses and Other Assets 8,392 (3,117 ) (2,337 ) (3,226 )
Accounts Payable and Other Liabilities (5,422 ) (4,067 ) (3,717 ) 4,004
Deferred Income   (8,718 )   (364 )   1,857     1,277  
Net Cash Provided by Operating Activities $ 35,374   $ 24,815   $ 126,382   $ 129,311  
                                   
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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