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): | October 28, 2021 |
|---|
McGRATH RENTCORP
(Exact name of registrant as specified in its Charter)
| California | 000-13292 | 94-2579843 |
|---|---|---|
| (State or other jurisdiction | (Commission File Number) | (I.R.S. Employer Identification No.) |
| of incorporation) |
5700 Las Positas Road, Livermore, CA 94551-7800
(Address of principal executive offices)
(925) 606-9200
(Registrant’s Telephone Number, Including Area Code)
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 |
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 (see General Instruction A.2. below):
| ☐ | 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)) |
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 Security 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 October 28, 2021, McGrath RentCorp (the “Company”) announced via press release the Company’s results for its third quarter ended September 30, 2021. 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 Item 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 October 28, 2021. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
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 | |||
|---|---|---|---|
| Dated: | October 28, 2021 | By: | /s/ Keith E. Pratt |
| Keith E. Pratt | |||
| Executive Vice President and Chief Financial Officer |
3
mgrc-ex991_6.htm
| Exhibit 99.1 | ||
|---|---|---|
| PRESS RELEASE | 5700 Las Positas Road<br><br><br>Livermore, California 94551<br><br><br>925-606-9200 |  |
FOR RELEASE October 28, 2021
McGrath RentCorp Announces Results for Third Quarter 2021
LIVERMORE, CA – October 28, 2021 – McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended September 30, 2021 of $173.3 million, an increase of 11%, compared to the third quarter of 2020. The Company reported net income of $23.3 million, or $0.95 per diluted share, for the third quarter of 2021, compared to net income of $28.1 million, or $1.15 per diluted share, for the third quarter of 2020.
THIRD QUARTER 2021 Company HIGHLIGHTS:
| • | Rental revenues increased 17% year-over-year to $103.3 million. |
|---|---|
| • | Total revenues increased 11% year-over-year to $173.3 million. |
| --- | --- |
| • | Adjusted EBITDA^1^ increased 5% to $66.0 million. |
| --- | --- |
| • | Dividend rate increased 4% year-over-year to $0.435 per share for the third quarter of 2021. On an annualized basis, this dividend represents a 2.3% yield on the October 27, 2021 close price of $75.24 per share. |
| --- | --- |
Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“Our third quarter results reflect improved end market conditions in each of our three rental business segments. Companywide rental revenues increased 17% year over year. Modular rental revenues grew 26%, with the majority of the growth attributable to our Design Space and Kitchens To Go acquisitions. Rental revenues at TRS and Adler grew 6% and 11%, respectively.
Our teams continued working through the integration of Design Space and Kitchens To Go during the quarter and I am very pleased with their progress. These acquisitions will provide additional long-term growth opportunities, as we expect to deploy more rental equipment capital in our expanded geographic coverage and to expand the breadth of products and services we bring to our customers.
We continued to see some cost pressures from elevated material and labor expenses, and some project delays, reflecting supply chain challenges. As business activity level increased, these factors pressured modular rental and sales margins during the quarter, and pushed completion of some modular sales projects to later in the current year, and in to next year. Partly offsetting these pressures, we are increasing pricing as demand improves.
The overall positive rental demand trends that we have seen in recent months have continued into the fourth quarter. We are fully focused on solid execution for the remainder of the year.”
Division HIGHLIGHTS:
All comparisons presented below are for the quarter ended September 30, 2021 to the quarter ended September 30, 2020 unless otherwise indicated.
Mobile Modular
For the third quarter of 2021, the Company’s Mobile Modular division reported income from operations of $23.5 million, a decrease of $1.4 million, or 5%. Rental revenues increased 26% to $59.2 million, depreciation expense increased 31% to $7.5 million and other direct costs increased 40% to $16.5 million, which resulted in an increase in gross profit on rental revenues of 19% to $35.1 million. The rental revenue increase reflects in part the new Design Space and Kitchens To Go customers that contributed approximately three quarters of the increase. Rental related services revenues increased 31% to $24.5 million, primarily attributable to higher amortization of modular building delivery and return delivery and dismantle revenues, higher site related and other services performed during the lease and increased delivery and return delivery revenues at Portable Storage, with associated gross profit increasing 15% to $6.0 million. Sales revenues decreased 10% to $26.4 million, primarily due to lower new equipment sales. Gross margin on sales was 31% compared
to 26% in 2020, resulting in a 9% increase in gross profit on sales revenues to $8.2 million. Selling and administrative expenses increased 47% to $26.1 million, primarily due to increased employee salaries and benefit costs totaling $2.5 million, mostly due to the addition of Design Space and Kitchens To Go employees, $2.4 million higher amortization of intangible assets associated with the Design Space and Kitchens To Go acquisitions and $1.4 million higher allocated corporate expenses.
TRS-RenTelco
For the third quarter of 2021, the Company’s TRS-RenTelco division reported income from operations of $9.5 million, an increase of $0.5 million, or 5%. Rental revenues increased 6% to $29.2 million, depreciation expense increased 5% to $12.2 million and other direct costs increased 4% to $5.0 million, which resulted in a 7% increase in gross profit on rental revenues to $12.0 million. The rental revenue increase was primarily the result of increased demand for general purpose equipment compared to the prior year. Sales revenues decreased 31% to $4.8 million. Gross margin on sales was 63% in 2021 compared to 44% in 2020, resulting in a 1% decrease in gross profit on sales revenues to $3.0 million. Selling and administrative expenses increased 1% to $6.0 million.
Adler Tanks
For the third quarter of 2021, the Company’s Adler Tanks division reported income from operations of $2.8 million, an increase of 4% compared to the prior year. Rental revenues increased 11% to $14.8 million, depreciation expense was comparable to the prior year and other direct costs increased 62% to $3.2 million, which resulted in an increased gross profit on rental revenues of 3%, to $7.6 million. Rental related services revenues increased 14% to $6.3 million, with gross profit on rental related services increasing 2%, to $1.2 million. Selling and administrative expenses increased 9% to $6.3 million primarily due to higher allocated corporate expenses.
financial outlook:
Based upon the Company’s year-to-date results and current outlook for the remainder of the year, the Company is updating its financial outlook.
For the full-year 2021, the Company expects:
| Previous | Current | ||
|---|---|---|---|
| • | Total revenue: | $610 million to $640 million | $618 million to $628 million |
| • | Adjusted EBITDA: | $245 million to $260 million | $245 million to $249 million |
| • | Gross rental equipment capital expenditures: | $100 million to $120 million | $108 million to $118 million |
| 1. | 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. | ||
| --- | --- | ||
| 2. | Information reconciling forward-looking Adjusted EBITDA to the comparable GAAP financial measures is unavailable to the Company without unreasonable effort because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the provision for income taxes. Therefore, no reconciliation to the most comparable GAAP measures is provided. The Company provides Adjusted EBITDA guidance because it believes that Adjusted EBITDA, when viewed with the Company’s results under GAAP, provides useful information for the reasons noted in the reconciliation of actual Adjusted EBITDA to the most directly comparable GAAP measures at the end of this release. | ||
| --- | --- |
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 October 1, 2021, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 28, 2021 to discuss the third quarter 2021 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 5485029. 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 statements about the Design Space and Kitchens To Go acquisitions providing additional long-term growth opportunities and the expectation to deploy more rental equipment capital and to expand the breadth of products and services to the Company’s customers, optimism about the overall positive rental demand trends, as well as the statements regarding the full year 2021 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 duration of the COVID-19 pandemic and its economic impact, the extent and length of the restrictions associated with COVID-19 pandemic, 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 ability to obtain the synergies expected from the Design Space and Kitchens To Go acquisitions and the success of integrating such acquisitions; the utilization levels and rental rates of our Adler Tanks liquid and solid containment tank and box rental assets; continued execution of our performance improvement initiatives; our ability to successfully increase prices to offset cost increases; 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 September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share amounts) | 2021 | 2020 | 2021 | 2020 | ||||||||
| Revenues | ||||||||||||
| Rental | $ | 103,269 | $ | 88,138 | $ | 283,937 | $ | 263,273 | ||||
| Rental related services | 31,513 | 25,040 | 73,870 | 70,026 | ||||||||
| Rental operations | 134,782 | 113,178 | 357,807 | 333,299 | ||||||||
| Sales | 37,636 | 42,331 | 80,503 | 87,366 | ||||||||
| Other | 874 | 939 | 2,612 | 2,909 | ||||||||
| Total revenues | 173,292 | 156,448 | 440,922 | 423,574 | ||||||||
| Costs and Expenses | ||||||||||||
| Direct costs of rental operations: | ||||||||||||
| Depreciation of rental equipment | 23,802 | 21,419 | 68,216 | 64,640 | ||||||||
| Rental related services | 24,356 | 18,603 | 56,236 | 51,760 | ||||||||
| Other | 24,711 | 18,553 | 67,696 | 56,171 | ||||||||
| Total direct costs of rental operations | 72,869 | 58,575 | 192,148 | 172,571 | ||||||||
| Costs of sales | 24,618 | 29,669 | 50,021 | 57,911 | ||||||||
| Total costs of revenues | 97,487 | 88,244 | 242,169 | 230,482 | ||||||||
| Gross profit | 75,805 | 68,204 | 198,753 | 193,093 | ||||||||
| Selling and administrative expenses | 39,907 | 30,871 | 109,305 | 93,365 | ||||||||
| Income from operations | 35,898 | 37,333 | 89,448 | 99,728 | ||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (3,168 | ) | (1,968 | ) | (7,208 | ) | (6,804 | ) | ||||
| Foreign currency exchange (loss) gain | (128 | ) | 130 | (185 | ) | (189 | ) | |||||
| Income before provision for income taxes | 32,602 | 35,495 | 82,055 | 92,735 | ||||||||
| Provision for income taxes | 9,350 | 7,394 | 20,797 | 21,926 | ||||||||
| Net income | $ | 23,252 | $ | 28,101 | $ | 61,258 | $ | 70,809 | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.96 | $ | 1.17 | $ | 2.53 | $ | 2.93 | ||||
| Diluted | $ | 0.95 | $ | 1.15 | $ | 2.50 | $ | 2.88 | ||||
| Shares used in per share calculation: | ||||||||||||
| Basic | 24,245 | 24,097 | 24,209 | 24,170 | ||||||||
| Diluted | 24,507 | 24,443 | 24,506 | 24,558 | ||||||||
| Cash dividends declared per share | $ | 0.435 | $ | 0.420 | $ | 1.305 | $ | 1.260 |
MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, | |||||
|---|---|---|---|---|---|
| (in thousands) | 2020 | ||||
| Assets | |||||
| Cash | 2,380 | $ | 1,238 | ||
| Accounts receivable, net of allowance for doubtful accounts of 2,225 in 2021<br> and 2,100 in 2020 | 168,831 | 123,316 | |||
| Rental equipment, at cost: | |||||
| Relocatable modular buildings | 1,023,344 | 882,115 | |||
| Electronic test equipment | 363,799 | 333,020 | |||
| Liquid and solid containment tanks and boxes | 311,677 | 315,706 | |||
| 1,698,820 | 1,530,841 | ||||
| Less: accumulated depreciation | (635,358 | ) | (592,725 | ) | |
| Rental equipment, net | 1,063,462 | 938,116 | |||
| Property, plant and equipment, net | 135,055 | 136,210 | |||
| Prepaid expenses and other assets | 59,523 | 41,549 | |||
| Intangible assets, net | 48,715 | 7,118 | |||
| Goodwill | 132,387 | 28,197 | |||
| Total assets | 1,610,353 | $ | 1,275,744 | ||
| Liabilities and Shareholders' Equity | |||||
| Liabilities: | |||||
| Notes payable | 459,475 | $ | 222,754 | ||
| Accounts payable and accrued liabilities | 137,308 | 108,334 | |||
| Deferred income | 69,634 | 45,975 | |||
| Deferred income taxes, net | 231,480 | 216,077 | |||
| Total liabilities | 897,897 | 593,140 | |||
| Shareholders’ equity: | |||||
| Common stock, no par value - Authorized 40,000 shares | |||||
| Issued and outstanding - 24,247 shares as of September 30, 2021 and 24,128 shares as of December 31, 2020 | 106,744 | 106,289 | |||
| Retained earnings | 605,754 | 576,419 | |||
| Accumulated other comprehensive loss | (42 | ) | (104 | ) | |
| Total shareholders’ equity | 712,456 | 682,604 | |||
| Total liabilities and shareholders’ equity | 1,610,353 | $ | 1,275,744 |
All values are in US Dollars.
MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended September 30, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2021 | 2020 | ||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||
| Net income | $ | 61,258 | $ | 70,809 | ||||||||||
| Adjustments to reconcile net income to net cash provided by<br><br><br>operating activities: | ||||||||||||||
| Depreciation and amortization | 79,047 | 71,249 | ||||||||||||
| Provision for doubtful accounts | 193 | 1,227 | ||||||||||||
| Share-based compensation | 5,302 | 4,894 | ||||||||||||
| Gain on sale of used rental equipment | (17,788 | ) | (14,110 | ) | ||||||||||
| Foreign currency exchange loss | 185 | 189 | ||||||||||||
| Amortization of debt issuance costs | 11 | 8 | ||||||||||||
| Change in: | ||||||||||||||
| Accounts receivable | (33,471 | ) | (2,561 | ) | ||||||||||
| Prepaid expenses and other assets | (11,409 | ) | (1,314 | ) | ||||||||||
| Accounts payable and accrued liabilities | 17,428 | (582 | ) | |||||||||||
| Deferred income | 20,128 | 3,591 | ||||||||||||
| Deferred income taxes | 15,403 | (1,863 | ) | |||||||||||
| Net cash provided by operating activities | 136,287 | 131,537 | ||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||
| Purchases of rental equipment | (90,379 | ) | (65,661 | ) | ||||||||||
| Purchases of property, plant and equipment | (969 | ) | (9,639 | ) | ||||||||||
| Cash paid for acquisition of businesses | (285,624 | ) | — | |||||||||||
| Proceeds from sales of used rental equipment | 41,556 | 33,837 | ||||||||||||
| Net cash used in investing activities | (335,416 | ) | (41,463 | ) | ||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||
| Net borrowing (repayment) under bank lines of credit | 176,758 | (43,460 | ) | |||||||||||
| Borrowings under note purchase agreement | 100,000 | — | ||||||||||||
| Principal payment of Series B senior notes | (40,000 | ) | — | |||||||||||
| Repurchase of common stock | — | (13,617 | ) | |||||||||||
| Taxes paid related to net share settlement of stock awards | (4,847 | ) | (3,930 | ) | ||||||||||
| Payment of dividends | (31,635 | ) | (29,642 | ) | ||||||||||
| Net cash provided by (used in) financing activities | 200,276 | (90,649 | ) | |||||||||||
| Effect of foreign currency exchange rate changes on cash | (5 | ) | (224 | ) | ||||||||||
| Net increase (decrease) in cash | 1,142 | (799 | ) | |||||||||||
| Cash balance, beginning of period | 1,238 | 2,342 | ||||||||||||
| Cash balance, end of period | $ | 2,380 | $ | 1,543 | ||||||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||||
| Interest paid, during the period | $ | 6,477 | $ | 6,829 | ||||||||||
| Net income taxes paid, during the period | $ | 8,074 | $ | 24,704 | ||||||||||
| Dividends accrued during the period, not yet paid | $ | 10,002 | $ | 10,355 | ||||||||||
| Rental equipment acquisitions, not yet paid | $ | 2,199 | $ | 5,827 | ||||||||||
| 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 September 30, 2021 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 59,223 | $ | 29,204 | $ | 14,842 | $ | — | $ | 103,269 | ||||
| Rental related services | 24,468 | 699 | 6,346 | — | 31,513 | |||||||||
| Rental operations | 83,691 | 29,903 | 21,188 | — | 134,782 | |||||||||
| Sales | 26,362 | 4,773 | 960 | 5,541 | 37,636 | |||||||||
| Other | 341 | 398 | 135 | — | 874 | |||||||||
| Total revenues | 110,394 | 35,074 | 22,283 | 5,541 | 173,292 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 7,544 | 12,151 | 4,107 | — | 23,802 | |||||||||
| Rental related services | 18,508 | 663 | 5,185 | — | 24,356 | |||||||||
| Other | 16,533 | 5,015 | 3,163 | — | 24,711 | |||||||||
| Total direct costs of rental operations | 42,585 | 17,829 | 12,455 | — | 72,869 | |||||||||
| Costs of sales | 18,145 | 1,743 | 680 | 4,050 | 24,618 | |||||||||
| Total costs of revenues | 60,730 | 19,572 | 13,135 | 4,050 | 97,487 | |||||||||
| Gross Profit | ||||||||||||||
| Rental | 35,146 | 12,038 | 7,572 | — | 54,756 | |||||||||
| Rental related services | 5,960 | 36 | 1,161 | — | 7,157 | |||||||||
| Rental operations | 41,106 | 12,074 | 8,733 | — | 61,913 | |||||||||
| Sales | 8,217 | 3,030 | 280 | 1,491 | 13,018 | |||||||||
| Other | 341 | 398 | 135 | — | 874 | |||||||||
| Total gross profit | 49,664 | 15,502 | 9,148 | 1,491 | 75,805 | |||||||||
| Selling and administrative expenses | 26,138 | 6,010 | 6,333 | 1,426 | 39,907 | |||||||||
| Income from operations | $ | 23,526 | $ | 9,492 | $ | 2,815 | $ | 65 | 35,898 | |||||
| Interest expense | (3,168 | ) | ||||||||||||
| Foreign currency exchange loss | (128 | ) | ||||||||||||
| Provision for income taxes | (9,350 | ) | ||||||||||||
| Net income | $ | 23,252 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 975,119 | $ | 362,104 | $ | 311,876 | ||||||||
| Average monthly total yield ^2^ | 2.02 | % | 2.69 | % | 1.59 | % | ||||||||
| Average utilization ^3^ | 76.5 | % | 66.9 | % | 48.1 | % | ||||||||
| Average monthly rental rate ^4^ | 2.65 | % | 4.02 | % | 3.30 | % | ||||||||
| 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 September 30, 2020 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 47,134 | $ | 27,619 | $ | 13,385 | $ | — | $ | 88,138 | ||||
| Rental related services | 18,684 | 800 | 5,556 | — | 25,040 | |||||||||
| Rental operations | 65,818 | 28,419 | 18,941 | — | 113,178 | |||||||||
| Sales | 29,275 | 6,912 | 230 | 5,914 | 42,331 | |||||||||
| Other | 320 | 525 | 94 | — | 939 | |||||||||
| Total revenues | 95,413 | 35,856 | 19,265 | 5,914 | 156,448 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 5,771 | 11,547 | 4,101 | — | 21,419 | |||||||||
| Rental related services | 13,510 | 673 | 4,420 | — | 18,603 | |||||||||
| Other | 11,780 | 4,820 | 1,953 | — | 18,553 | |||||||||
| Total direct costs of rental operations | 31,061 | 17,040 | 10,474 | — | 58,575 | |||||||||
| Costs of sales | 21,726 | 3,853 | 251 | 3,839 | 29,669 | |||||||||
| Total costs of revenues | 52,787 | 20,893 | 10,725 | 3,839 | 88,244 | |||||||||
| Gross Profit (Loss) | ||||||||||||||
| Rental | 29,583 | 11,252 | 7,331 | — | 48,166 | |||||||||
| Rental related services | 5,174 | 127 | 1,136 | — | 6,437 | |||||||||
| Rental operations | 34,757 | 11,379 | 8,467 | — | 54,603 | |||||||||
| Sales | 7,549 | 3,059 | (21 | ) | 2,075 | 12,662 | ||||||||
| Other | 320 | 525 | 94 | — | 939 | |||||||||
| Total gross profit | 42,626 | 14,963 | 8,540 | 2,075 | 68,204 | |||||||||
| Selling and administrative expenses | 17,739 | 5,962 | 5,821 | 1,349 | 30,871 | |||||||||
| Income from operations | $ | 24,887 | $ | 9,001 | $ | 2,719 | $ | 726 | 37,333 | |||||
| Interest expense | (1,968 | ) | ||||||||||||
| Foreign currency exchange income | 130 | |||||||||||||
| Provision for income taxes | (7,394 | ) | ||||||||||||
| Net income | $ | 28,101 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 829,460 | $ | 336,015 | $ | 314,933 | ||||||||
| Average monthly total yield ^2^ | 1.89 | % | 2.74 | % | 1.42 | % | ||||||||
| Average utilization ^3^ | 76.3 | % | 67.1 | % | 44.1 | % | ||||||||
| Average monthly rental rate ^4^ | 2.48 | % | 4.08 | % | 3.21 | % | ||||||||
| 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) | ||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 159,118 | $ | 84,340 | $ | 40,479 | $ | — | $ | 283,937 | ||||
| Rental related services | 54,726 | 2,149 | 16,995 | — | 73,870 | |||||||||
| Rental operations | 213,844 | 86,489 | 57,474 | — | 357,807 | |||||||||
| Sales | 48,766 | 14,679 | 2,161 | 14,897 | 80,503 | |||||||||
| Other | 1,004 | 1,292 | 316 | — | 2,612 | |||||||||
| Total revenues | 263,614 | 102,460 | 59,951 | 14,897 | 440,922 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 20,437 | 35,429 | 12,350 | — | 68,216 | |||||||||
| Rental related services | 40,384 | 2,061 | 13,791 | — | 56,236 | |||||||||
| Other | 45,309 | 14,267 | 8,120 | — | 67,696 | |||||||||
| Total direct costs of rental operations | 106,130 | 51,757 | 34,261 | — | 192,148 | |||||||||
| Costs of sales | 32,127 | 5,836 | 1,523 | 10,535 | 50,021 | |||||||||
| Total costs of revenues | 138,257 | 57,593 | 35,784 | 10,535 | 242,169 | |||||||||
| Gross Profit | ||||||||||||||
| Rental | 93,373 | 34,643 | 20,009 | — | 148,025 | |||||||||
| Rental related services | 14,340 | 90 | 3,204 | — | 17,634 | |||||||||
| Rental operations | 107,713 | 34,733 | 23,213 | — | 165,659 | |||||||||
| Sales | 16,640 | 8,842 | 638 | 4,362 | 30,482 | |||||||||
| Other | 1,004 | 1,292 | 316 | — | 2,612 | |||||||||
| Total gross profit | 125,357 | 44,867 | 24,167 | 4,362 | 198,753 | |||||||||
| Selling and administrative expenses | 67,977 | 18,381 | 18,853 | 4,094 | 109,305 | |||||||||
| Income from operations | $ | 57,380 | $ | 26,486 | $ | 5,314 | $ | 268 | 89,448 | |||||
| Interest expense | (7,208 | ) | ||||||||||||
| Foreign currency exchange loss | (185 | ) | ||||||||||||
| Provision for income taxes | (20,797 | ) | ||||||||||||
| Net income | $ | 61,258 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 906,633 | $ | 348,749 | $ | 312,928 | ||||||||
| Average monthly total yield ^2^ | 1.95 | % | 2.69 | % | 1.44 | % | ||||||||
| Average utilization ^3^ | 76.0 | % | 67.4 | % | 44.0 | % | ||||||||
| Average monthly rental rate ^4^ | 2.57 | % | 3.98 | % | 3.26 | % | ||||||||
| 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) | ||||||||||||||
| Nine months ended September 30, 2020 | ||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||
| Revenues | ||||||||||||||
| Rental | $ | 141,172 | $ | 81,167 | $ | 40,934 | $ | — | $ | 263,273 | ||||
| Rental related services | 51,291 | 2,296 | 16,439 | — | 70,026 | |||||||||
| Rental operations | 192,463 | 83,463 | 57,373 | — | 333,299 | |||||||||
| Sales | 51,847 | 17,943 | 960 | 16,616 | 87,366 | |||||||||
| Other | 1,063 | 1,592 | 254 | — | 2,909 | |||||||||
| Total revenues | 245,373 | 102,998 | 58,587 | 16,616 | 423,574 | |||||||||
| Costs and Expenses | ||||||||||||||
| Direct costs of rental operations: | ||||||||||||||
| Depreciation | 17,177 | 35,129 | 12,334 | — | 64,640 | |||||||||
| Rental related services | 37,222 | 1,836 | 12,702 | — | 51,760 | |||||||||
| Other | 36,773 | 12,762 | 6,636 | — | 56,171 | |||||||||
| Total direct costs of rental operations | 91,172 | 49,727 | 31,672 | — | 172,571 | |||||||||
| Costs of sales | 37,274 | 9,350 | 799 | 10,488 | 57,911 | |||||||||
| Total costs of revenues | 128,446 | 59,077 | 32,471 | 10,488 | 230,482 | |||||||||
| Gross Profit | ||||||||||||||
| Rental | 87,222 | 33,276 | 21,964 | — | 142,462 | |||||||||
| Rental related services | 14,069 | 460 | 3,737 | — | 18,266 | |||||||||
| Rental operations | 101,291 | 33,736 | 25,701 | — | 160,728 | |||||||||
| Sales | 14,573 | 8,593 | 161 | 6,128 | 29,455 | |||||||||
| Other | 1,064 | 1,592 | 254 | — | 2,910 | |||||||||
| Total gross profit | 116,928 | 43,921 | 26,116 | 6,128 | 193,093 | |||||||||
| Selling and administrative expenses | 52,014 | 18,198 | 18,998 | 4,155 | 93,365 | |||||||||
| Income from operations | $ | 64,914 | $ | 25,723 | $ | 7,118 | $ | 1,973 | 99,728 | |||||
| Interest expense | (6,804 | ) | ||||||||||||
| Foreign currency exchange loss | (189 | ) | ||||||||||||
| Provision for income taxes | (21,926 | ) | ||||||||||||
| Net income | $ | 70,809 | ||||||||||||
| Other Information | ||||||||||||||
| Average rental equipment ^1^ | $ | 822,723 | $ | 337,330 | $ | 314,859 | ||||||||
| Average monthly total yield ^2^ | 1.89 | % | 2.67 | % | 1.44 | % | ||||||||
| Average utilization ^3^ | 77.5 | % | 65.6 | % | 45.5 | % | ||||||||
| Average monthly rental rate ^4^ | 2.46 | % | 4.08 | % | 3.18 | % | ||||||||
| 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<br><br><br>September 30, | Nine Months Ended<br><br><br>September 30, | Twelve Months Ended<br><br><br>September 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income | $ | 23,252 | $ | 28,101 | $ | 61,258 | $ | 70,809 | $ | 92,433 | $ | 97,210 | ||||||
| Provision for income taxes | 9,350 | 7,394 | 20,797 | 21,926 | 28,931 | 30,979 | ||||||||||||
| Interest expense | 3,168 | 1,968 | 7,208 | 6,804 | 9,191 | 9,728 | ||||||||||||
| Depreciation and amortization | 28,488 | 23,587 | 79,047 | 71,249 | 102,441 | 94,765 | ||||||||||||
| EBITDA | 64,258 | 61,050 | 168,310 | 170,788 | 232,996 | 232,682 | ||||||||||||
| Share-based compensation | 1,705 | 1,670 | 5,302 | 4,894 | 5,957 | 6,690 | ||||||||||||
| Adjusted EBITDA ^1^ | $ | 65,963 | $ | 62,720 | $ | 173,612 | $ | 175,682 | $ | 238,953 | $ | 239,372 | ||||||
| Adjusted EBITDA margin ^2^ | 38 | % | 40 | % | 39 | % | 41 | % | 41 | % | 42 | % |
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
| (dollar amounts in thousands) | Three Months Ended<br><br><br>September 30, | Nine Months Ended<br><br><br>September 30, | Twelve Months Ended<br><br><br>September 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Adjusted EBITDA ^1^ | $ | 65,963 | $ | 62,720 | $ | 173,612 | $ | 175,682 | $ | 238,953 | $ | 239,372 | ||||||
| Interest paid | (2,490 | ) | (1,798 | ) | (6,477 | ) | (6,829 | ) | (8,698 | ) | (9,945 | ) | ||||||
| Income taxes paid, net of refunds received | (1,084 | ) | (22,551 | ) | (8,074 | ) | (24,704 | ) | (18,273 | ) | (32,202 | ) | ||||||
| Gain on sale of used rental equipment | (5,918 | ) | (4,508 | ) | (17,788 | ) | (14,110 | ) | (23,007 | ) | (20,251 | ) | ||||||
| Foreign currency exchange loss (gain) | 128 | (130 | ) | 185 | 189 | (82 | ) | 59 | ||||||||||
| Amortization of debt issuance costs | 5 | 3 | 11 | 8 | 14 | 11 | ||||||||||||
| Change in certain assets and liabilities: | ||||||||||||||||||
| Accounts receivable, net | (27,922 | ) | (3,493 | ) | (33,278 | ) | (1,334 | ) | (27,161 | ) | 8,630 | |||||||
| Prepaid expenses and other assets | (2,024 | ) | 327 | (11,409 | ) | (1,314 | ) | (6,288 | ) | (3,110 | ) | |||||||
| Accounts payable and other liabilities | (1,023 | ) | 5,669 | 19,377 | 358 | 22,248 | 2,315 | |||||||||||
| Deferred income | 12,670 | (2,224 | ) | 20,128 | 3,591 | 7,548 | (2,217 | ) | ||||||||||
| Net cash provided by operating activities | $ | 38,305 | $ | 34,015 | $ | 136,287 | $ | 131,537 | $ | 185,254 | $ | 182,662 | ||||||
| 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. Pratt | |||||||||||||||||
| --- | --- | |||||||||||||||||
| EVP & Chief Financial Officer | ||||||||||||||||||
| 925-606-9200 |