Rental revenues decrease 1% Net income up 7% EPS increases 19% to $0.38 for the quarter

LIVERMORE, Calif., Aug. 02, 2016 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ:MGRC) (the "Company"), a diversified business-to-business rental company, today announced total revenues for the quarter ended June 30, 2016 of $103.1 million, an increase of 7%, compared to $96.0 million in the second quarter of 2015.  The Company reported net income of $9.1 million, or $0.38 per diluted share for the second quarter of 2016, compared to net income of $8.5 million, or $0.32 per diluted share, in the second quarter of 2015.

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

"Although second quarter rental revenues were down slightly from a year ago, EPS and net income were up 19% and 7%, respectively. This is a reflection of stronger year-over-year sales and profitability in our Mobile Modular and Enviroplex businesses, which more than offset weakness at Adler Tank Rentals and relatively flat TRS-RenTelco profitability, and the favorable effect of a lower dilutive share count.

Modular division-wide rental revenues for the quarter increased $4.0 million, or 14%, to $31.6 million from a year ago.  This is the thirteenth consecutive year over year quarterly rental revenue increase.  Modular division average rental equipment utilization based on original acquisition cost for the quarter increased to 75.8% from 74.4% a year ago. This is our highest second quarter utilization level since the second quarter of 2008.  Modular division EBIT, or income from operations, for the quarter increased to $8.3 million, or by 57%, from the same period a year ago. Gross margin on rental revenues increased to 48% for the quarter from 44% last year, driven by 14% higher rental revenues with only 5% and 11% higher building preparation costs and depreciation expense, respectively.  EBIT margin increased to 17% for the quarter compared to 13% in 2015 primarily driven by improved rental metrics, including higher gross margin on rental related services and lower SG&A costs as a percentage of rental revenues, partially offset by slightly lower gross margin on equipment sales.

Mobile Modular Portable Storage continued to make good progress during the second quarter in building its customer following, increasing booking levels and growing rental revenues from a year ago.  First month's rent booking levels and rental revenues for the second quarter grew by 20% and 22%, respectively, from the same period a year ago. We are working hard to make each of our portable storage operating geographies increasingly successful. We are on track towards building a meaningful sized storage container rental business with attractive operating metrics.

Rental revenues for TRS-RenTelco, our electronics division, declined $1.6 million for the quarter, or by 7%, to $20.3 million from a year ago.  The year over year reduction in rental revenues was driven primarily by lower communications test equipment business activity and a continuing highly competitive environment.  In fact, communications and general-purpose test equipment rental revenues declined by approximately 12% and 3%, respectively, for the quarter compared to the same period a year ago.  Average equipment utilization was flat at 59.5% compared to the same period in 2015.  Average rental rates declined for the quarter to 4.45% from 4.56% for the second quarter of 2015, primarily due to the business activity mix shift from communications to general-purpose test equipment as well as a highly competitive communications test equipment marketplace.  Despite the 7% decrease in topline rental revenues for the quarter, EBIT increased slightly to $6.0 million, or 1%, from $5.9 million a year ago. The reduction in rental revenue was offset by lower rental equipment depreciation and higher gross profit on equipment sales compared to a year ago.  Our electronics management and sales teams are continuing to do an excellent job in a softer test equipment rental environment by selling lower utilized rental equipment to reduce depreciation expense as well as holding costs down in other operating areas.  In fact, these efforts have resulted in depreciation as a percentage of rental revenues declining to 44% for the quarter, compared to 47% a year ago.

Rental revenues at Adler Tank Rentals, our liquid and solid containment tank and box division, declined $2.9 million for the quarter, or 16%, to $14.8 million from a year ago.  Average utilization and total original acquisition cost of rental equipment were 49.4% and $308 million, respectively, for the quarter compared to 60.6% and $303 million a year ago, and 50.3% and $308 million for the first quarter of 2016.  Second quarter average equipment on rent declined to $152 million from $183 million a year ago, and from $155 million for the first quarter of 2016.  Average monthly rental rates were fairly flat year over year; however, this was due to the change in the mix of utilized rental assets with lower rental rate tank assets decreasing and higher rental rate box inventory increasing.  Without the decrease in utilization of tank assets, overall rental rates would have been lower year over year.  The reduction in utilization from a year ago and the continuing downward pressure on pricing, especially for tank rental assets, are directly related to lower crude oil prices and the significant decline in wellhead related drilling and completions activity.  Upstream oil and natural gas rental revenue declined from 19% of total Adler rental revenues in the second quarter of 2015 to 11% for the same period in 2016.  These dynamics have put increasing downward pressure on 21K multi-purpose tank utilization and rental rates in upstream, midstream and downstream energy sectors, as well as in other market verticals. EBIT for the quarter decreased $2.2 million, or 41%, to $3.2 million from a year ago.  The higher percentage decrease in EBIT at 41% as compared to rental revenues at 16% was primarily a result of higher equipment depreciation and SG&A expenses as a percentage of rental revenues of 27% and 46%, respectively, from 22% and 39% a year ago.  We remain very cautious in our outlook for our liquid and solid containment rental business for the foreseeable future as market forces drive a material reset of both the oil and natural gas industries.

We entered 2016 with many unknowns and forecasting challenges regarding the crude oil and natural gas industries' evolving structural changes and their near-term impact to our liquid and solid containment rental business.  Our first six months results for 2016 for Adler Tank Rentals are reflective of just how challenging an environment we are facing.  However, business by business, we continue to focus on what we have control over towards improving return on invested capital ("ROIC").  Overall, our focus is to deploy less capital, and more selectively, for new rental assets over the next few years until we see sustainable higher ROIC levels."           

All comparisons presented below are for the quarter ended June 30, 2016 to the quarter ended June 30, 2015 unless otherwise indicated.

Mobile Modular

For the second quarter of 2016, the Company's Mobile Modular division reported a $3.0 million increase in income from operations, or 57%, to $8.3 million. Rental revenues increased 14% to $31.6 million, depreciation expense increased 11% to $5.2 million and other direct costs increased 5% to $11.2 million, which resulted in an increase in gross profit on rental revenues of 24% to $15.2 million.  Rental related services revenues increased 16% to $12.1 million, with gross profit on rental related services revenues increasing 23% to $3.8 million. Sales revenues increased 51% to $5.8 million, with gross profit on sales revenues increasing 36% to $1.5 million, primarily due to higher new equipment sales in the second quarter of 2016.  Selling and administrative expenses increased 9% to $12.3 million, primarily due to increased salaries and employee benefit costs and higher allocated corporate expenses. 

TRS-RenTelco

For the second quarter of 2016, the Company's TRS-RenTelco division reported a $0.1 million increase in income from operations, or 1%, to $6.0 million. Rental revenues decreased $1.6 million to $20.3 million, depreciation expense decreased 13% to $9.0 million and other direct costs increased 2% to $3.3 million, which resulted in a decrease in gross profit on rental revenues of 4% to $7.9 million.  Sales revenues increased 33% to $6.4 million.  Gross profit on sales revenues increased 13% to $3.0 million, with gross margin percentage decreasing to 47% from 55%, due to lower gross margins on new and used equipment sales in the second quarter of 2016. Selling and administrative expenses increased 1% to $5.5 million.

Adler Tanks

For the second quarter of 2016, the Company's Adler Tanks division reported a $2.2 million decrease in income from operations, or 41%, to $3.2 million. Rental revenues decreased 16% to $14.8 million, depreciation expense increased 1% to $4.0 million and other direct costs decreased 3% to $2.1 million, which resulted in a decrease in gross profit on rental revenues of 25% to $8.7 million.  Rental related services revenues increased 9% to $6.5 million, with gross profit on rental related services increasing 28% to $1.4 million. Selling and administrative expenses were flat at $6.9 million.

OTHER HIGHLIGHTS
  • Debt decreased $2.7 million during the quarter to $363.1 million, with the Company's funded debt (notes payable) to equity ratio decreasing from 0.96 to 1 at March 31, 2016 to 0.95 to 1 at June 30, 2016.  As of June 30, 2016, the Company had capacity to borrow an additional $208.7 million under its lines of credit. 
  • Dividend rate increased 2% to $0.255 per share for the second quarter of 2016 compared to the second quarter of 2015. On an annualized basis, this dividend represents a 3.2% yield on the August 1, 2016 close price of $31.56 per share.
  • Adjusted EBITDA increased 2% to $39.3 million for the second quarter of 2016 compared to the second quarter of 2015.  At June 30, 2016, the Company's ratio of funded debt to the last twelve months actual Adjusted EBITDA was 2.20 to 1, compared to 2.22 to 1 at March 31, 2016.  Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization and share-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.

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

FINANCIAL OUTLOOK

The Company reconfirms its expectation that total Company operating profit, Adjusted EBITDA and earnings per diluted share for fiscal year 2016 will be comparable to 2015 results.

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 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 under the trade name Mobile Modular Portable Storage.  Today, the business is located in the key markets of California, Texas, Florida, Northern Illinois, New Jersey and most recently entered the North Carolina region.  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.mobilemodular.comPortable Storage - www.mobilemodularcontainers.comElectronic Test Equipment - www.trs-rentelco.comSchool Facilities Manufacturing - www.enviroplex.com

Conference Call Note

As previously announced in its press release of July 5, 2016, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on August 2, 2016 to discuss the second quarter 2016 results.  To participate in the teleconference, dial 1-888-655-3290 (in the U.S.), or 1-484-895-1592 (outside the U.S.), 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 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.).  The pass code for the call replay is 44678868. In addition, a live audio webcast and replay of the call may be found in the investor relations section of the Company's website at http://mgrc.com/Investor/EventsAndArchive

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: optimism about the Company's ability to build a meaningful sized storage container rental business with attractive operating metrics; the Company's focus in its electronics division on selling lower utilized rental equipment to reduce depreciation expense and holding costs down in other operating areas; the Company's focus on deploying less capital and more selectively, for new rental assets over the next few years until achievement of sustainable higher ROIC levels; and reconfirmation that the Company's operating profit, Adjusted EBITDA and earnings per diluted share for 2016 will be comparable to 2015 in the section entitled "Financial Outlook."

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 extent of and timetable for the recovery underway in our modular building division, particularly in California; the impact of material forces in the oil and natural gas industries on the utilization levels of our Adler Tanks liquid and sold containment tank and box rental assets; the impact of continuing softness in communications test equipment rental demand in our electronics division; our continuing ability to sell lower utilized electronics rental equipment to reduce depreciation expense; the extent of economic recovery, particularly in California, including the impact on funding for school facility projects and residential and commercial construction sectors; our ability to manage our capital expenditures and reduce operating costs in a timely manner in response to market challenges in our various business segments; our customers' need and ability to rent our products; failure by third parties to manufacture and deliver our products in a timely manner and to our specifications; our ability to successfully integrate and operate acquisitions, as well as manage expansions; 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; new or modified statutory or regulatory requirements; success of our strategic growth initiatives; success of our ROIC analysis for our business segments; 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.

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, 2015, 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,  
(amounts in thousands, except per share amounts)   2016     2015     2016     2015  
                                 
Revenues                                
Rental   $ 66,747     $ 67,305     $ 133,279     $ 132,807  
Rental related services     19,315       17,227       36,906       32,594  
Rental operations     86,062       84,532       170,185       165,401  
Sales     16,396       10,968       25,430       19,755  
Other     647       526       1,189       1,058  
Total revenues     103,105       96,026       196,804       186,214  
Costs and Expenses                                
Direct costs of rental operations:                                
Depreciation of rental equipment     18,231       19,016       36,771       37,698  
Rental related services     13,984       12,901       27,164       24,800  
Other     16,713       16,226       32,540       31,437  
Total direct costs of rental operations     48,928       48,143       96,475       93,935  
Costs of  sales     10,421       6,965       15,918       12,274  
Total costs of revenues     59,349       55,108       112,393       106,209  
Gross profit     43,756       40,918       84,411       80,005  
Selling and administrative expenses     25,683       24,453       52,080       49,665  
Income from operations     18,073       16,465       32,331       30,340  
Other income (expenses):                                
Interest expense     (2,990 )     (2,347 )     (6,546 )     (4,738 )
Foreign currency exchange gain (loss)     (77 )     (85 )     74       (253 )
Income before provision for income taxes     15,006       14,033       25,859       25,349  
Provision for income taxes     5,927       5,543       10,214       10,013  
Net income   $ 9,079     $ 8,490     $ 15,645     $ 15,336  
Earnings per share:                                
Basic   $ 0.38     $ 0.33     $ 0.66     $ 0.59  
Diluted   $ 0.38     $ 0.32     $ 0.65     $ 0.58  
Shares used in per share calculation:                                
Basic     23,900       26,142       23,881       26,117  
Diluted     23,949       26,273       23,931       26,272  
Cash dividend declared per share   $ 0.255     $ 0.250     $ 0.510     $ 0.500  
                                 
 

                   
MCGRATH RENTCORP  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(UNAUDITED)  
                 
    June 30,     December 31,  
(in thousands)   2016     2015  
                 
Assets                
Cash   $ 1,238     $ 1,103  
Accounts receivable, net of allowance for doubtful accounts of $2,087 in 2016  and  2015     95,860       95,263  
Income taxes receivable           11,000  
Rental equipment, at cost:                
Relocatable modular buildings     761,125       736,875  
Electronic test equipment     251,080       262,945  
Liquid and solid containment tanks and boxes     310,089       310,263  
      1,322,294       1,310,083  
Less accumulated depreciation     (453,872 )     (440,482 )
Rental equipment, net     868,422       869,601  
Property, plant and equipment, net     114,241       109,753  
Prepaid expenses and other assets     31,419       28,556  
Intangible assets, net     9,030       9,465  
Goodwill     27,808       27,808  
Total assets   $ 1,148,018     $ 1,152,549  
Liabilities and Shareholders ' Equity                
Liabilities:                
Notes payable   $ 363,121     $ 381,281  
Accounts payable and accrued liabilities     73,779       71,942  
Deferred income     38,349       36,288  
Deferred income taxes, net     289,456       283,351  
Total liabilities     764,705       772,862  
Shareholders' equity:                
Common stock, no par value - Authorized 40,000 shares                
Issued and outstanding - 23,907 shares as of June 30, 2016 and 23,851 shares as of December 31, 2015     101,313       101,046  
Retained earnings     282,121       278,708  
Accumulated other comprehensive loss     (121 )     (67 )
Total shareholders' equity     383,313       379,687  
Total liabilities and shareholders' equity   $ 1,148,018     $ 1,152,549  
                 
 

  

MCGRATH RENTCORP  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(UNAUDITED)  
                 
    Six Months Ended June 30,  
(in thousands)   2016     2015  
Cash Flows from Operating Activities:                
Net income   $ 15,645     $ 15,336  
Adjustments to reconcile net income to net cash provided by operating  activities:                
Depreciation and amortization     41,417       42,171  
Provision for doubtful accounts     987       690  
Share-based compensation     1,586       1,953  
Gain on sale of used rental equipment     (6,282 )     (5,565 )
Foreign currency exchange loss (gain)     (74 )     253  
Change in:                
Accounts receivable     (1,584 )     6,630  
Income taxes receivable     11,000        
Prepaid expenses and other assets     (2,863 )     7,981  
Accounts payable and accrued liabilities     5,232       1,715  
Deferred income     2,061       587  
Deferred income taxes     6,105       (6,514 )
Net cash provided by operating activities     73,230       65,237  
Cash Flows from Investing Activities:                
Purchases of rental equipment     (45,715 )     (71,237 )
Purchases of property, plant and equipment     (8,698 )     (5,832 )
Proceeds from sale of used rental equipment     13,059       11,815  
Net cash used in investing activities     (41,354 )     (65,254 )
Cash Flows from Financing Activities:                
Net borrowings under bank lines of credit     1,814       34,699  
Principal payments on Series A senior notes     (20,000 )     (20,000 )
Amortization of debt issuance cost     26       26  
Proceeds from the exercise of stock options     37       1,458  
Excess tax benefit (shortfall) from exercise of stock awards     (871 )     313  
Taxes paid related to net share settlement of stock awards     (486 )     (584 )
Repurchase of common stock           (3,132 )
Payment of dividends     (12,253 )     (13,176 )
Net cash used in financing activities     (31,733 )     (396 )
Effect of foreign currency exchange rate changes on cash     (8 )     (15 )
Net increase (decrease) in cash     135       (428 )
Cash balance, beginning of period     1,103       1,167  
Cash balance, end of period   $ 1,238     $ 739  
Supplemental Disclosure of Cash Flow Information:                
Interest paid, during the period   $ 6,646     $ 4,896  
Net income taxes paid, during the period   $ 5,679     $ 1,490  
Dividends accrued during the period, not yet paid   $ 6,135     $ 6,588  
Rental equipment acquisitions, not yet paid   $ 3,935     $ 8,390  
                 

MCGRATH RENTCORP                                        
BUSINESS SEGMENT DATA (unaudited)                                        
Three months ended June 30, 2016                                        
(dollar amounts in thousands)   Mobile Modular     TRS-RenTelco     Adler Tanks     Enviroplex     Consolidated  
Revenues                                        
Rental   $ 31,637     $ 20,269     $ 14,841     $     $ 66,747  
Rental related services     12,132       717       6,466             19,315  
Rental operations     43,769       20,986       21,307             86,062  
Sales     5,785       6,428       184       3,999       16,396  
Other     125       494       28             647  
Total revenues     49,679       27,908       21,519       3,999       103,105  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     5,221       8,998       4,012             18,231  
Rental related services     8,331       629       5,024             13,984  
Other     11,229       3,337       2,147             16,713  
Total direct costs of rental operations     24,781       12,964       11,183             48,928  
Costs of  sales     4,264       3,402       201       2,554       10,421  
Total costs of revenues     29,045       16,366       11,384       2,554       59,349  
                                         
Gross Profit (Loss)                                        
Rental     15,188       7,933       8,682             31,803  
Rental related services     3,801       88       1,442             5,331  
Rental operations     18,989       8,021       10,124             37,134  
Sales     1,520       3,027       (17 )     1,445       5,975  
Other     125       494       28             647  
Total gross profit     20,634       11,542       10,135       1,445       43,756  
Selling and administrative expenses     12,336       5,546       6,893       908       25,683  
Income from operations   $ 8,298     $ 5,996     $ 3,242     $ 537       18,073  
Interest expense                                     (2,990 )
Foreign currency exchange loss                                     (77 )
Provision for income taxes                                     (5,927 )
Net income                                   $ 9,079  
                                         
Other Information                                        
Average rental equipment 1   $ 717,755     $ 254,970     $ 307,868                  
Average monthly total yield 2     1.47 %     2.65 %     1.61 %                
Average utilization 3     75.8 %     59.5 %     49.4 %                
Average monthly rental rate 4     1.94 %     4.45 %     3.25 %                
 
  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 average month end costs of rental equipment on rent by the average month end total costs of 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, 2015                                        
(dollar amounts in thousands)   Mobile Modular     TRS-RenTelco     Adler Tanks     Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 27,680     $ 21,889     $ 17,736     $     $ 67,305  
Rental related services     10,488       794       5,945             17,227  
Rental operations     38,168       22,683       23,681             84,532  
Sales     3,831       4,832       416       1,889       10,968  
Other     121       386       19             526  
Total revenues     42,120       27,901       24,116       1,889       96,026  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     4,719       10,325       3,972             19,016  
Rental related services     7,388       692       4,821             12,901  
Other     10,740       3,278       2,208             16,226  
Total direct costs of rental operations     22,847       14,295       11,001             48,143  
Costs of  sales     2,711       2,165       742       1,347       6,965  
Total costs of revenues     25,558       16,460       11,743       1,347       55,108  
                                         
Gross Profit (Loss)                                        
Rental     12,221       8,286       11,556             32,063  
Rental related services     3,100       102       1,124             4,326  
Rental operations     15,321       8,388       12,680             36,389  
Sales     1,120       2,667       (326 )     542       4,003  
Other     121       386       19             526  
Total gross profit     16,562       11,441       12,373       542       40,918  
Selling and administrative expenses     11,286       5,493       6,901       773       24,453  
Income from operations   $ 5,276     $ 5,948     $ 5,472     $ (231 )     16,465  
Interest expense                                     (2,347 )
Foreign currency exchange loss                                     (85 )
Provision for income taxes                                     (5,543 )
Net income                                   $ 8,490  
                                         
Other Information                                        
Average rental equipment 1   $ 655,479     $ 269,225     $ 302,697                  
Average monthly total yield 2     1.41 %     2.71 %     1.95 %                
Average utilization 3     74.4 %     59.5 %     60.6 %                
Average monthly rental rate 4     1.89 %     4.56 %     3.23 %                
 
  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 average month end costs of rental equipment on rent by the average month end total costs of 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, 2016                                        
(dollar amounts in thousands)   Mobile Modular     TRS-RenTelco     Adler Tanks     Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 62,792     $ 41,197     $ 29,290     $     $ 133,279  
Rental related services     23,337       1,501       12,068             36,906  
Rental operations     86,129       42,698       41,358             170,185  
Sales     8,432       12,262       589       4,147       25,430  
Other     202       932       55             1,189  
Total revenues     94,763       55,892       42,002       4,147       196,804  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     10,347       18,386       8,038             36,771  
Rental related services     16,321       1,265       9,578             27,164  
Other     20,790       6,976       4,774             32,540  
Total direct costs of rental operations     47,458       26,627       22,390             96,475  
Costs of  sales     6,018       6,707       535       2,658       15,918  
Total costs of revenues     53,476       33,334       22,925       2,658       112,393  
                                         
Gross Profit                                        
Rental     31,656       15,834       16,478             63,968  
Rental related services     7,016       236       2,490             9,742  
Rental operations     38,672       16,070       18,968             73,710  
Sales     2,413       5,556       54       1,489       9,512  
Other     202       932       55             1,189  
Total gross profit     41,287       22,558       19,077       1,489       84,411  
Selling and administrative expenses     24,798       11,343       14,155       1,784       52,080  
Income (loss) from operations   $ 16,489     $ 11,215     $ 4,922     $ (295 )     32,331  
Interest expense                                     (6,546 )
Foreign currency exchange loss                                     74  
Provision for income taxes                                     (10,214 )
Net income                                   $ 15,645  
                                         
Other Information                                        
Average rental equipment 1   $ 713,503     $ 257,767     $ 307,752                  
Average monthly total yield 2     1.47 %     2.66 %     1.60 %                
Average utilization 3     76.0 %     59.5 %     49.7 %                
Average monthly rental rate 4     1.93 %     4.48 %     3.19 %                
 
  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 average month end costs of rental equipment on rent by the average month end total costs of 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, 2015                                        
(dollar amounts in thousands)   Mobile Modular     TRS-RenTelco     Adler Tanks     Enviroplex     Consolidated  
                                         
Revenues                                        
Rental   $ 54,088     $ 44,000     $ 34,719     $     $ 132,807  
Rental related services     19,591       1,450       11,553           32,594  
Rental operations     73,679       45,450       46,272           165,401  
Sales     7,091       9,772       691       2,201       19,755  
Other     234       773       51           1,058  
Total revenues     81,004       55,995       47,014       2,201       186,214  
                                         
Costs and Expenses                                        
Direct costs of rental operations:                                        
Depreciation     9,280       20,477       7,941           37,698  
Rental related services     14,169       1,390       9,241           24,800  
Other     20,265       6,673       4,499           31,437  
Total direct costs of rental operations     43,714       28,540       21,681           93,935  
Costs of  sales     5,024       4,704       953       1,593       12,274  
Total costs of revenues     48,738       33,244       22,634       1,593       106,209  
                                         
Gross Profit (Loss)                                        
Rental     24,543       16,850       22,279           63,672  
Rental related services     5,422       60       2,312           7,794  
Rental operations     29,965       16,910       24,591           71,466  
Sales     2,067       5,068       (262 )     608       7,481  
Other     234       773       51           1,058  
Total gross profit     32,266       22,751       24,380       608       80,005  
Selling and administrative expenses     22,642       11,611       13,819       1,593       49,665  
Income (loss) from operations   $ 9,624     $ 11,140     $ 10,561     $ (985 )   $ 30,340  
Interest expense                                     (4,738 )
Foreign currency exchange loss                                     (253 )
Provision for income taxes                                     (10,013 )
Net income                                   $ 15,336  
                                         
Other Information                                        
Average rental equipment 1   $ 648,446     $ 266,528     $ 301,580                  
Average monthly total yield 2     1.39 %     2.75 %     1.92 %                
Average utilization 3     74.3 %     59.8 %     60.9 %                
Average monthly rental rate 4     1.87 %     4.60 %     3.15 %                
 
  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 average month end costs of rental equipment on rent by the average month end total costs of 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 share-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 the Company's ability to meet future capital expenditure and working capital requirements.  Management believes the exclusion of non-cash charges, including share-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 share-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 SEC, 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 June 30,     Six Months Ended June 30,     Twelve Months Ended June 30,  
    2016     2015     2016     2015     2016     2015  
Net income   $ 9,079     $ 8,490     $ 15,645     $ 15,336     $ 40,779     $ 42,969  
Provision for income taxes     5,927       5,543       10,214       10,013       26,108       29,211  
Interest     2,990       2,347       6,546       4,738       11,900       9,480  
Depreciation and amortization     20,557       21,265       41,417       42,171       83,526       83,314  
EBITDA     38,553       37,645       73,822       72,258       162,313       164,974  
Share-based compensation     730       1,022       1,586       1,953       3,032       3,823  
Adjusted EBITDA 1   $ 39,283     $ 38,667     $ 75,408     $ 74,211     $ 165,345     $ 168,797  
Adjusted EBITDA margin 2     38 %     40 %     38 %     40 %     40 %     41 %
                                                 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

 (dollar amounts in thousands)   Three Months Ended June 30,     Six Months Ended June 30,     Twelve Months Ended June 30,  
    2016     2015     2016     2015     2016     2015  
Adjusted EBITDA 1   $ 39,283     $ 38,667     $ 75,408     $ 74,211     $ 165,345     $ 168,797  
Interest paid     (3,660 )     (2,888 )     (6,646 )     (4,896 )     (11,791 )     (9,772 )
Net income taxes paid     (4,973 )     (1,174 )     (5,679 )     (1,490 )     (6,687 )     (15,239 )
Gain on sale of used rental equipment     (3,316 )     (2,696 )     (6,282 )     (5,565 )     (12,619 )     (14,489 )
Foreign currency exchange loss (gain)     77       65       (74 )     253       161       574  
Change in certain assets and liabilities:                                                
Accounts receivable, net     (3,977 )     (4,613 )     (597 )     7,320       (1,886 )     (4,890 )
Income taxes receivable                 11,000                    
Prepaid expenses and other assets     (4,812 )     1,857       (2,863 )     7,981       1,812       (3,410 )
Accounts payable and other liabilities     13,451       1,032       6,902       (13,164 )     9,535       7,811  
Deferred income     1,525       367       2,061       587       8,623       3,643  
Net cash provided by operating activities   $ 33,598     $ 30,617     $ 73,230     $ 65,237     $ 152,493     $ 133,025  
                                                 
  1. Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, and share-based compensation.
  2. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.

 
FOR INFORMATION CONTACT:Keith E. PrattChief Financial Officer		925 606 9200		

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