8-K
MCGRATH RENTCORP (MGRC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
_________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 25, 2020
_______________________________
MCGRATH RENTCORP
(Exact name of registrant as specified in its charter)
_______________________________
| California | 000-13292 | 94-2579843 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
5700 Las Positas Road
Livermore, California 94551-7800
(Address of Principal Executive Offices) (Zip Code)
((925)) 606-9200
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
_______________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | MGRC | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 25, 2020, McGrath RentCorp (the “Company”) announced via press release the Company’s results for its fourth quarter ended December 31, 2019. A copy of the Company’s press release is attached hereto as Exhibit 99.1. This Form 8-K and the attached exhibit are provided under Items 2.02 of Form 8-K and are furnished to, but not filed with, the Securities and Exchange Commission, and shall not be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release of McGrath RentCorp, dated February 25, 2020. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MCGRATH RENTCORP | ||
|---|---|---|
| Date: February 25, 2020 | By: | /s/ Keith E. Pratt |
| Keith E. Pratt | ||
| Executive Vice President and Chief Financial Officer |
EdgarFiling
EXHIBIT 99.1
McGrath RentCorp Announces Results for Fourth Quarter 2019
Company Announces 12% Dividend Increase; 29th Consecutive Year Increase
LIVERMORE, Calif., Feb. 25, 2020 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended December 31, 2019 of $147.2 million, an increase of 11%, compared to the fourth quarter of 2018. The Company reported net income of $26.4 million, or $1.07 per diluted share, for the fourth quarter of 2019, compared to net income of $24.2 million, or $0.99 per diluted share, for the fourth quarter of 2018.
Total revenues for the year ended December 31, 2019 increased to $570.2 million from $498.3 million in 2018, with income from operations increasing 20% to $141.4 million. Net income for the year ended December 31, 2019 increased to $96.8 million, or $3.93 per diluted share, from $79.4 million, or $3.24 per diluted share, in 2018.
The Company also announced that the board of directors declared a quarterly cash dividend of $0.42 per share for the quarter ending March 31, 2020, an increase of $0.045, or 12%, over the prior year period. The cash dividend will be payable on April 30, 2020 to all shareholders of record on April 15, 2020. This marks the 29^th^ consecutive year the Company has increased its annual dividend.
FOURTH QUARTER 2019 COMPANY HIGHLIGHTS:
- Income from operations increased 9% year-over-year to $38.2 million.
- Rental revenues increased 8% year-over-year to $92.2 million.
- Adjusted EBITDA^1^ increased 11% year-over-year to $63.7 million.
- Dividend rate increased 10% year-over-year to $0.375 per share for the fourth quarter of 2019. On an annualized basis, this dividend represents a 1.9% yield on the February 24, 2020 close price of $78.54 per share.
Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“We were pleased with our fourth quarter 2019 results as our teams delivered impressive revenue and operating profit growth over the strong fourth quarter results of 2018. The positive trends seen earlier in the year at Mobile Modular and TRS-RenTelco continued into the fourth quarter, more than offsetting weaker market demand conditions for Adler Tank Rentals.
Full year results reflected overall healthy demand for the markets we serve, coupled with continued focus on performance improvement and disciplined capital allocation. Our 20% growth in income from operations was driven by strong rental operations revenue growth of 13% and a notably strong year for equipment sales revenues, which grew by 19%.
Looking ahead we expect overall business conditions to support further growth for the Company in 2020, despite softer demand conditions for Adler Tank Rentals. We will maintain our focus on performance improvement and execution, and I believe that we will continue to build upon 2019’s successes.”
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended December 31, 2019 to the quarter ended December 31, 2018 unless otherwise indicated.
MOBILE MODULAR
For the fourth quarter of 2019, the Company’s Mobile Modular division reported income from operations of $23.9 million, an increase of $4.5 million, or 23%. Rental revenues increased 14% to $48.6 million, depreciation expense increased 5% to $5.6 million and other direct costs increased 22% to $11.4 million, which resulted in an increase in gross profit on rental revenues of 13% to $31.5 million. The rental revenue growth came from both commercial and education markets. Rental related services revenues increased 16% to $16.4 million, with associated gross profit increasing 17% to $4.1 million. Sales revenues increased 78% to $15.6 million and gross margin on sales increased to 30% from 28%, resulting in a 94% increase in gross profit on sales revenues to $4.7 million. Selling and administrative expenses increased 19% to $17.7 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.
TRS-RENTELCO
For the fourth quarter of 2019, the Company’s TRS-RenTelco division reported income from operations of $9.5 million, an increase of $1.0 million, or 11%. Rental revenues increased 15% to $27.7 million, depreciation expense increased 20% to $11.4 million and other direct costs increased 6% to $4.1 million, which resulted in a 14% increase in gross profit on rental revenues to $12.1 million. The rental revenue growth came from both general purpose and communications test equipment market. Sales revenues decreased 17% to $5.4 million. Gross margin on sales increased to 62% from 47%, resulting in a 9% increase in gross profit on sales revenues to $3.3 million. Selling and administrative expenses increased 8% to $6.5 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.
ADLER TANKS
For the fourth quarter of 2019, the Company’s Adler Tanks division reported income from operations of $3.4 million, a decrease of $1.9 million, or 36%. Rental revenues decreased 13% to $16.0 million, depreciation expense increased 3% to $4.1 million and other direct costs decreased 1% to $2.7 million, which resulted in a decrease in gross profit on rental revenues of 21% to $9.1 million. The rental revenue decrease was across all end markets. Rental related services revenues increased 2% to $7.0 million, with gross profit on rental related services decreasing 2% to $1.4 million. Selling and administrative expenses decreased 7% to $7.3 million, primarily due to decreased salaries and employee benefit costs.
FINANCIAL OUTLOOK:
For the full-year 2020, the Company expects:
- Total revenue: $575 million - $595 million, compared to $570 million in 2019.
- Adjusted EBITDA^1^: $240 million - $248 million, compared to $237 million in 2019.
- Net capital expenditures^2^: $110 million to $120 million, compared to $135 million in 2019.
- Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation. A reconciliation of actual net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
- Net capital expenditure is purchases of rental equipment and property, plant and equipment less proceeds from sales of used rental equipment
ABOUT MCGRATH RENTCORP:
Founded in 1979, McGrath RentCorp (Nasdaq: MGRC) is a diversified business-to-business rental company providing modular buildings, electronic test equipment, portable storage and tank containment solutions across the United States and other select North American regions. The Company’s rental operations consist of four divisions: Mobile Modular rents and sells modular buildings to fulfill customers’ temporary and permanent classroom and office space needs; TRS-RenTelco rents and sells electronic test equipment; Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids; and Mobile Modular Portable Storage provides portable storage rental solutions. For more information on McGrath RentCorp and its operating units, please visit our websites:
Corporate – www.mgrc.com Modular Buildings – www.mobilemodular.com Electronic Test Equipment – www.trsrentelco.com Tanks and Boxes – www.adlertankrentals.com Portable Storage – www.mobilemodularcontainers.com School Facilities Manufacturing – www.enviroplex.com
You should read this press release in conjunction with the financial statements and notes thereto included in the Company’s latest Forms 10-K, 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, 10-Q and other SEC filings.
CONFERENCE CALL NOTE:
As previously announced in its press release of January 27, 2020, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 25, 2020 to discuss the fourth quarter 2019 results. To participate in the teleconference, dial 1-844-707-0666 (in the U.S.), or 1-703-639-1220 (outside the U.S.), or to listen only, access the simultaneous webcast at the investor relations section of the Company’s website at https://investors.mgrc.com/. A replay 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 conference call replay is 1079158. 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 https://investors.mgrc.com/events-and-presentations.
FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, regarding McGrath RentCorp’s expectations, strategies, prospects or targets are forward looking statements. These forward-looking statements also can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plan,” “predict,” “project,” or “will,” or the negative of these terms or other comparable terminology*.* In particular, Mr. Hanna’s comments on the expectation of overall business conditions supporting further growth for the Company in 2020, despite softer demand conditions for Adler Tank Rentals, as well as the full year 2020 outlook in the “Financial Outlook” section are forward-looking.
These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected including: the health of the education and commercial markets in our modular building division; the activity levels in the general purpose and communications test equipment markets at TRS-RenTelco; the utilization levels and rental rates of our Adler Tanks liquid and sold containment tank and box rental assets; continued execution of our performance improvement initiatives; and our ability to effectively manage our rental assets, as well as the factors disclosed under “Risk Factors” in the Company’s Form 10-K and other SEC filings.
Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any of the forward-looking statements contained in this press release.
MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| Three **** Months **** Ended **** December 31, | Twelve Months **** Ended **** December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share amounts) | 2019 | 2018 | 2019 | 2018 | ||||||||
| Revenues | ||||||||||||
| Rental | $ | 92,231 | $ | 85,091 | $ | 353,889 | $ | 318,774 | ||||
| Rental related services | 24,300 | 22,110 | 101,038 | 82,907 | ||||||||
| Rental operations | 116,531 | 107,201 | 454,927 | 401,681 | ||||||||
| Sales | 28,842 | 24,896 | 110,229 | 92,618 | ||||||||
| Other | 1,848 | 1,018 | 5,074 | 4,031 | ||||||||
| Total revenues | 147,221 | 133,115 | 570,230 | 498,330 | ||||||||
| Costs and Expenses | ||||||||||||
| Direct costs of rental operations: | ||||||||||||
| Depreciation of rental equipment | 21,169 | 18,852 | 80,391 | 73,139 | ||||||||
| Rental related services | 18,734 | 16,894 | 76,241 | 64,298 | ||||||||
| Other | 18,237 | 15,982 | 79,365 | 68,678 | ||||||||
| Total direct costs of rental operations | 58,140 | 51,728 | 235,997 | 206,115 | ||||||||
| Costs of sales | 18,084 | 16,284 | 68,068 | 58,964 | ||||||||
| Total costs of revenues | 76,224 | 68,012 | 304,065 | 265,079 | ||||||||
| Gross profit | 70,997 | 65,103 | 266,165 | 233,251 | ||||||||
| Selling and administrative expenses | 32,749 | 29,937 | 124,793 | 115,770 | ||||||||
| Income from operations | 38,248 | 35,166 | 141,372 | 117,481 | ||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (2,924 | ) | (3,164 | ) | (12,331 | ) | (12,297 | ) | ||||
| Foreign currency exchange gain (loss) | 130 | 16 | 84 | (489 | ) | |||||||
| Income before provision for income taxes | 35,454 | 32,018 | 129,125 | 104,695 | ||||||||
| Provision for income taxes | 9,053 | 7,769 | 32,319 | 25,289 | ||||||||
| Net income | $ | 26,401 | $ | 24,249 | $ | 96,806 | $ | 79,406 | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 1.09 | $ | 1.00 | $ | 3.99 | $ | 3.29 | ||||
| Diluted | $ | 1.07 | $ | 0.99 | $ | 3.93 | $ | 3.24 | ||||
| Shares used in per share calculation: | ||||||||||||
| Basic | 24,290 | 24,179 | 24,250 | 24,141 | ||||||||
| Diluted | 24,697 | 24,514 | 24,623 | 24,540 | ||||||||
| Cash dividends declared per share | $ | 0.375 | $ | 0.340 | $ | 1.50 | $ | 1.36 |
MCGRATH RENTCORP CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| (in thousands) | 2018 | ||||
| Assets | |||||
| Cash | 2,342 | $ | 1,508 | ||
| Accounts receivable, net of allowance for doubtful accounts of 1,883 in 2019 and 2018 | 128,099 | 121,016 | |||
| Rental equipment, at cost: | |||||
| Relocatable modular buildings | 868,807 | 817,375 | |||
| Electronic test equipment | 335,343 | 285,052 | |||
| Liquid and solid containment tanks and boxes | 316,261 | 313,573 | |||
| 1,520,411 | 1,416,000 | ||||
| Less accumulated depreciation | (552,911 | ) | (514,985 | ) | |
| Rental equipment, net | 967,500 | 901,015 | |||
| Property, plant and equipment, net | 131,047 | 126,899 | |||
| Prepaid expenses and other assets | 45,356 | 31,816 | |||
| Intangible assets, net | 7,334 | 7,254 | |||
| Goodwill | 28,197 | 27,808 | |||
| Total assets | 1,309,875 | $ | 1,217,316 | ||
| Liabilities and Shareholders' Equity | |||||
| Liabilities: | |||||
| Notes payable | 293,431 | $ | 298,564 | ||
| Accounts payable and accrued liabilities | 109,174 | 90,844 | |||
| Deferred income | 54,964 | 49,709 | |||
| Deferred income taxes, net | 218,270 | 206,664 | |||
| Total liabilities | 675,839 | 645,781 | |||
| Shareholders’ equity: | |||||
| Common stock, no par value - Authorized 40,000 shares | |||||
| Issued and outstanding - 24,296 shares as of December 31, 2019 and 24,182 shares as of December 31, 2018 | 106,360 | 103,801 | |||
| Retained earnings | 527,746 | 467,783 | |||
| Accumulated other comprehensive loss | (70 | ) | (49 | ) | |
| Total shareholders’ equity | 634,036 | 571,535 | |||
| Total liabilities and shareholders’ equity | 1,309,875 | $ | 1,217,316 |
All values are in US Dollars.
MCGRATH RENTCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Twelve Months Ended December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2019 | 2018 | ||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||
| Net income | $ | 96,806 | $ | 79,406 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 89,476 | 81,975 | ||||||||||||
| Impairment of rental assets | — | 39 | ||||||||||||
| Provision for doubtful accounts | 1,013 | 581 | ||||||||||||
| Share-based compensation | 5,892 | 4,111 | ||||||||||||
| Gain on sale of used rental equipment | (21,309 | ) | (19,559 | ) | ||||||||||
| Foreign currency exchange (gain) loss | (84 | ) | 489 | |||||||||||
| Amortization of debt issuance costs | 11 | 20 | ||||||||||||
| Change in: | ||||||||||||||
| Accounts receivable | (7,323 | ) | (15,725 | ) | ||||||||||
| Prepaid expenses and other assets | (13,530 | ) | (9,351 | ) | ||||||||||
| Accounts payable and accrued liabilities | 20,298 | (1,612 | ) | |||||||||||
| Deferred income | 5,138 | 10,258 | ||||||||||||
| Deferred income taxes | 11,606 | 12,035 | ||||||||||||
| Net cash provided by operating activities | 187,994 | 142,667 | ||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||
| Purchases of rental equipment | (167,703 | ) | (123,071 | ) | ||||||||||
| Purchases of property, plant and equipment | (12,080 | ) | (15,664 | ) | ||||||||||
| Cash paid for acquisition of business assets | (7,808 | ) | (7,543 | ) | ||||||||||
| Proceeds from sales of used rental equipment | 44,447 | 41,786 | ||||||||||||
| Net cash used in investing activities | (143,144 | ) | (104,492 | ) | ||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||
| Net borrowings (repayment) under bank lines of credit | (5,144 | ) | 15,130 | |||||||||||
| Principal payments on Series A senior notes | — | (20,000 | ) | |||||||||||
| Taxes paid related to net share settlement of stock awards | (3,333 | ) | (3,257) | |||||||||||
| Payment of dividends | (35,539 | ) | (30,939 | ) | ||||||||||
| Net cash used in financing activities | (44,016 | ) | (39,066 | ) | ||||||||||
| Effect of foreign currency exchange rate changes on cash | — | (102 | ) | |||||||||||
| Net increase (decrease) in cash | 834 | (993 | ) | |||||||||||
| Cash balance, beginning of period | 1,508 | 2,501 | ||||||||||||
| Cash balance, end of period | $ | 2,342 | $ | 1,508 | ||||||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||||
| Interest paid, during the period | $ | 12,475 | $ | 12,598 | ||||||||||
| Net income taxes paid, during the period | $ | 17,528 | $ | 18,157 | ||||||||||
| Dividends accrued during the period, not yet paid | $ | 9,489 | $ | 8,388 | ||||||||||
| Rental equipment acquisitions, not yet paid | $ | 6,496 | $ | 9,695 | ||||||||||
| MCGRATH RENTCORP | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| BUSINESS SEGMENT DATA (unaudited) | ||||||||||||||
| Three months ended December 31, 2019 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 48,580 | $ | 27,654 | $ | 15,997 | $ | — | $ | 92,231 | ||||
| Rental related services | 16,449 | 835 | 7,016 | — | 24,300 | |||||||||
| Rental operations | 65,029 | 28,489 | 23,013 | — | 116,531 | |||||||||
| Sales | 15,642 | 5,361 | 263 | 7,576 | 28,842 | |||||||||
| Other | 1,223 | 557 | 68 | — | 1,848 | |||||||||
| Total revenues | 81,894 | 34,407 | 23,344 | 7,576 | 147,221 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 5,622 | 11,415 | 4,132 | — | 21,169 | |||||||||
| Rental related services | 12,333 | 783 | 5,618 | — | 18,734 | |||||||||
| Other | 11,415 | 4,097 | 2,725 | — | 18,237 | |||||||||
| Total direct costs of rental operations | 29,370 | 16,295 | 12,475 | — | 58,140 | |||||||||
| Costs of sales | 10,935 | 2,037 | 235 | 4,877 | 18,084 | |||||||||
| Total costs of revenues | 40,305 | 18,332 | 12,710 | 4,877 | 76,224 | |||||||||
| Gross Profit | ||||||||||||||
| Rental | 31,543 | 12,142 | 9,140 | — | 52,825 | |||||||||
| Rental related services | 4,116 | 52 | 1,398 | — | 5,566 | |||||||||
| Rental operations | 35,659 | 12,194 | 10,538 | — | 58,391 | |||||||||
| Sales | 4,707 | 3,324 | 28 | 2,699 | 10,758 | |||||||||
| Other | 1,223 | 557 | 68 | — | 1,848 | |||||||||
| Total gross profit | 41,589 | 16,075 | 10,634 | 2,699 | 70,997 | |||||||||
| Selling and administrative expenses | 17,686 | 6,544 | 7,267 | 1,252 | 32,749 | |||||||||
| Income from operations | $ | 23,903 | $ | 9,531 | $ | 3,367 | $ | 1,447 | $ | 38,248 | ||||
| Interest expense | (2,924 | ) | ||||||||||||
| Foreign currency exchange gain | 130 | |||||||||||||
| Provision for income taxes | (9,053 | ) | ||||||||||||
| Net income | $ | 26,401 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 813,535 | $ | 328,038 | $ | 314,906 | ||||||||
| Average monthly total yield ^2^ | 1.99 | % | 2.81 | % | 1.69 | % | ||||||||
| Average utilization ^3^ | 79.3 | % | 66.8 | % | 50 | % | ||||||||
| Average monthly rental rate ^4^ | 2.51 | % | 4.2 | % | 3.39 | % |
- 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.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- 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.
- 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, 2018 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 42,700 | $ | 24,018 | $ | 18,373 | $ | — | $ | 85,091 | ||||
| Rental related services | 14,186 | 1,013 | 6,911 | — | 22,110 | |||||||||
| Rental operations | 56,886 | 25,031 | 25,284 | — | 107,201 | |||||||||
| Sales | 8,773 | 6,493 | 415 | 9,215 | 24,896 | |||||||||
| Other | 302 | 606 | 110 | — | 1,018 | |||||||||
| Total revenues | 65,961 | 32,130 | 25,809 | 9,215 | 133,115 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 5,359 | 9,475 | 4,018 | — | 18,852 | |||||||||
| Rental related services | 10,670 | 742 | 5,482 | — | 16,894 | |||||||||
| Other | 9,352 | 3,865 | 2,765 | — | 15,982 | |||||||||
| Total direct costs of rental operations | 25,381 | 14,082 | 12,265 | — | 51,728 | |||||||||
| Costs of sales | 6,345 | 3,430 | 520 | 5,989 | 16,284 | |||||||||
| Total costs of revenues | 31,726 | 17,512 | 12,785 | 5,989 | 68,012 | |||||||||
| Gross Profit (Loss) | ||||||||||||||
| Rental | 27,989 | 10,678 | 11,590 | — | 50,257 | |||||||||
| Rental related services | 3,516 | 271 | 1,429 | — | 5,216 | |||||||||
| Rental operations | 31,505 | 10,949 | 13,019 | — | 55,473 | |||||||||
| Sales | 2,428 | 3,063 | (105 | ) | 3,226 | 8,612 | ||||||||
| Other | 302 | 606 | 110 | — | 1,018 | |||||||||
| Total gross profit | 34,235 | 14,618 | 13,024 | 3,226 | 65,103 | |||||||||
| Selling and administrative expenses | 14,826 | 6,043 | 7,781 | 1,287 | 29,937 | |||||||||
| Income from operations | $ | 19,409 | $ | 8,575 | $ | 5,243 | $ | 1,939 | 35,166 | |||||
| Interest expense | (3,164 | ) | ||||||||||||
| Foreign currency exchange gain | 16 | |||||||||||||
| Provision for income taxes | (7,769 | ) | ||||||||||||
| Net income | $ | 24,249 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 770,355 | $ | 284,959 | $ | 311,815 | ||||||||
| Average monthly total yield ^2^ | 1.85 | % | 2.81 | % | 1.96 | % | ||||||||
| Average utilization ^3^ | 79.2 | % | 63.1 | % | 61 | % | ||||||||
| Average monthly rental rate ^4^ | 2.33 | % | 4.45 | % | 3.22 | % |
- 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.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- 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.
- 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, 2019 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 182,316 | $ | 103,704 | $ | 67,869 | $ | — | $ | 353,889 | ||||
| Rental related services | 69,395 | 3,260 | 28,383 | — | 101,038 | |||||||||
| Rental operations | 251,711 | 106,964 | 96,252 | — | 454,927 | |||||||||
| Sales | 47,043 | 22,106 | 1,266 | 39,814 | 110,229 | |||||||||
| Other | 2,256 | 2,413 | 405 | — | 5,074 | |||||||||
| Total revenues | 301,010 | 131,483 | 97,923 | 39,814 | 570,230 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 22,071 | 41,948 | 16,372 | — | 80,391 | |||||||||
| Rental related services | 51,787 | 2,791 | 21,663 | — | 76,241 | |||||||||
| Other | 51,136 | 16,303 | 11,926 | — | 79,365 | |||||||||
| Total direct costs of rental operations | 124,994 | 61,042 | 49,961 | — | 235,997 | |||||||||
| Costs of sales | 32,398 | 9,693 | 948 | 25,029 | 68,068 | |||||||||
| Total costs of revenues | 157,392 | 70,735 | 50,909 | 25,029 | 304,065 | |||||||||
| Gross Profit | ||||||||||||||
| Rental | 109,109 | 45,453 | 39,571 | — | 194,133 | |||||||||
| Rental related services | 17,608 | 469 | 6,720 | — | 24,797 | |||||||||
| Rental operations | 126,717 | 45,922 | 46,291 | — | 218,930 | |||||||||
| Sales | 14,645 | 12,413 | 318 | 14,785 | 42,161 | |||||||||
| Other | 2,256 | 2,413 | 405 | — | 5,074 | |||||||||
| Total gross profit | 143,618 | 60,748 | 47,014 | 14,785 | 266,165 | |||||||||
| Selling and administrative expenses | 65,699 | 24,645 | 29,321 | 5,128 | 124,793 | |||||||||
| Income from operations | $ | 77,919 | $ | 36,103 | $ | 17,693 | $ | 9,657 | $ | 141,372 | ||||
| Interest expense | (12,331 | ) | ||||||||||||
| Foreign currency exchange gain | 84 | |||||||||||||
| Provision for income taxes | (32,319 | ) | ||||||||||||
| Net income | $ | 96,806 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 795,250 | $ | 306,426 | $ | 313,810 | ||||||||
| Average monthly total yield ^2^ | 1.9 | % | 2.82 | % | 1.8 | % | ||||||||
| Average utilization ^3^ | 79.2 | % | 66.2 | % | 54.7 | % | ||||||||
| Average monthly rental rate ^4^ | 2.41 | % | 4.26 | % | 3.29 | % |
- 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.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- 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.
- 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, 2018 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 159,136 | $ | 89,937 | $ | 69,701 | $ | — | $ | 318,774 | ||||
| Rental related services | 54,696 | 3,300 | 24,911 | — | 82,907 | |||||||||
| Rental operations | 213,832 | 93,237 | 94,612 | — | 401,681 | |||||||||
| Sales | 39,467 | 23,061 | 1,044 | 29,046 | 92,618 | |||||||||
| Other | 1,275 | 2,359 | 397 | — | 4,031 | |||||||||
| Total revenues | 254,574 | 118,657 | 96,053 | 29,046 | 498,330 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 21,200 | 36,011 | 15,928 | — | 73,139 | |||||||||
| Rental related services | 41,701 | 2,698 | 19,899 | — | 64,298 | |||||||||
| Other | 42,812 | 14,699 | 11,167 | — | 68,678 | |||||||||
| Total direct costs of rental operations | 105,713 | 53,408 | 46,994 | — | 206,115 | |||||||||
| Costs of sales | 28,111 | 10,476 | 1,004 | 19,373 | 58,964 | |||||||||
| Total costs of revenues | 133,824 | 63,884 | 47,998 | 19,373 | 265,079 | |||||||||
| Gross Profit | ||||||||||||||
| Rental | 95,123 | 39,227 | 42,607 | — | 176,957 | |||||||||
| Rental related services | 12,995 | 602 | 5,012 | — | 18,609 | |||||||||
| Rental operations | 108,118 | 39,829 | 47,619 | — | 195,566 | |||||||||
| Sales | 11,357 | 12,585 | 39 | 9,673 | 33,654 | |||||||||
| Other | 1,275 | 2,359 | 397 | — | 4,031 | |||||||||
| Total gross profit | 120,750 | 54,773 | 48,055 | 9,673 | 233,251 | |||||||||
| Selling and administrative expenses | 58,017 | 22,823 | 30,026 | 4,904 | 115,770 | |||||||||
| Income from operations | $ | 62,733 | $ | 31,950 | $ | 18,029 | $ | 4,769 | $ | 117,481 | ||||
| Interest expense | (12,297 | ) | ||||||||||||
| Foreign currency exchange loss | (489 | ) | ||||||||||||
| Provision for income taxes | (25,289 | ) | ||||||||||||
| Net income | $ | 79,406 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 756,513 | $ | 275,891 | $ | 310,401 | ||||||||
| Average monthly total yield ^2^ | 1.75 | % | 2.72 | % | 1.87 | % | ||||||||
| Average utilization ^3^ | 78.2 | % | 62.7 | % | 59.9 | % | ||||||||
| Average monthly rental rate ^4^ | 2.24 | % | 4.33 | % | 3.13 | % |
- 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.
- Average monthly total yield is calculated by dividing the averages of monthly rental revenues by the cost of rental equipment for the period.
- 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.
- 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, non-cash impairment costs 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 | Twelve Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Net income | $ | 26,401 | $ | 24,249 | $ | 96,806 | $ | 79,406 | ||||
| Provision for income taxes | 9,053 | 7,769 | 32,319 | 25,289 | ||||||||
| Interest expense | 2,924 | 3,164 | 12,331 | 12,297 | ||||||||
| Depreciation and amortization | 23,516 | 21,079 | 89,476 | 81,975 | ||||||||
| EBITDA | 61,894 | 56,261 | 230,932 | 198,967 | ||||||||
| Impairment of rental assets | — | — | — | 39 | ||||||||
| Share-based compensation | 1,796 | 1,301 | 5,892 | 4,111 | ||||||||
| Adjusted EBITDA ^1^ | $ | 63,690 | $ | 57,562 | $ | 236,824 | $ | 203,117 | ||||
| Adjusted EBITDA margin ^2^ | 43 | % | 43 | % | 42 | % | 41 | % |
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
| (dollar amounts in thousands) | Three Months Ended | Twelve Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Adjusted EBITDA ^1^ | $ | 63,690 | $ | 57,562 | $ | 236,824 | $ | 203,117 | ||||
| Interest paid | (3,116 | ) | (3,405 | ) | (12,475 | ) | (12,598 | ) | ||||
| Income taxes paid, net of refunds received | (7,498 | ) | (2,102 | ) | (17,528 | ) | (18,157 | ) | ||||
| Gain on sale of used rental equipment | (6,141 | ) | (4,515 | ) | (21,309 | ) | (19,559 | ) | ||||
| Foreign currency exchange loss | (130 | ) | (16 | ) | (84 | ) | 489 | |||||
| Amortization of debt issuance cost | 3 | 2 | 11 | 20 | ||||||||
| Change in certain assets and liabilities: | ||||||||||||
| Accounts receivable, net | 9,964 | (5,927 | ) | (6,310 | ) | (15,144 | ) | |||||
| Prepaid expenses and other assets | (1,796 | ) | 844 | (13,530 | ) | (9,351 | ) | |||||
| Accounts payable and other liabilities | 1,957 | 1,867 | 17,257 | 3,592 | ||||||||
| Deferred income | (5,808 | ) | 1,517 | 5,138 | 10,258 | |||||||
| Net cash provided by operating activities | $ | 51,125 | $ | 45,827 | $ | 187,994 | $ | 142,667 |
- Adjusted EBITDA is defined as net income before interest expense, provision for income taxes, depreciation, amortization, non-cash impairment costs and share-based compensation.
- Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues for the period.
| FOR INFORMATION CONTACT: | Keith E. Pratt |
|---|---|
| EVP & Chief Financial Officer | |
| 925-606-9200 |