LIVERMORE, Calif., Oct. 29, 2019 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ: MGRC) (the “Company”), a diversified business-to-business rental company, today announced total revenues for the quarter ended September 30, 2019 of $173.6 million, an increase of 21%, compared to the third quarter of 2018. The Company reported net income of $32.5 million, or $1.32 per diluted share, for the third quarter of 2019, compared to net income of $24.8 million, or $1.01 per diluted share, for the third quarter of 2018.
THIRD QUARTER 2019 COMPANY HIGHLIGHTS:
- Income from operations increased 30% year-over-year to $46.7 million.
- Rental revenues increased 11% year-over-year to $90.9 million.
- Adjusted EBITDA1 increased 24% year-over-year to $70.8 million.
- Dividend rate increased 10% year-over-year to $0.375 per share for the third quarter of 2019. On an annualized basis, this dividend represents a 2.1% yield on the October 28, 2019 close price of $69.99 per share.
Joe Hanna, President and CEO of McGrath RentCorp, made the following comments regarding these results and future expectations:
“The third quarter underscored the benefit of our diverse portfolio as companywide total revenues increased 21%. Mobile Modular, TRS-RenTelco, and Enviroplex delivered significant operating profit growth compared to a year ago, contributing to the Company’s overall 30% operating profit increase. Our operating profit growth was driven by strong gross profit increases in both rental operations and sales.
Mobile Modular rental revenues for the quarter increased 13% from a year ago, driven by improvement in average rental rates, a larger fleet and improved utilization with equipment on rent increasing 7%. Commercial and education rentals grew compared to a year ago, and reflected healthy overall business conditions. Portable Storage rental revenues grew by 11%.
TRS-RenTelco rental revenues for the quarter increased 21%, primarily driven by higher average rental equipment and improved utilization. Demand for both general purpose and communications test equipment was healthy, as we serviced testing demand for both R&D needs as well as communications network upgrades.
Adler Tank Rentals rental revenues for the quarter decreased 8% from a year ago, driven primarily by lower utilization, partly offset by higher rental rates. Weaker activity levels across multiple market segments contributed to a slower quarter compared to a year ago.
Sales revenues increased 41%, driven by seasonally strong demand for education projects at Enviroplex.
Our portfolio enabled us to deliver strong top line and operating profit growth despite softness in one of our businesses. We remain positive about our overall momentum entering the fourth quarter. Despite some economic uncertainty, many fundamentals remain healthy and our activity levels are good. We look forward to finishing 2019 on solid footing.”
____________
- 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 net income to Adjusted EBITDA and Adjusted EBITDA to net cash provided by operating activities can be found at the end of this release.
DIVISION HIGHLIGHTS:
All comparisons presented below are for the quarter ended September 30, 2019 to the quarter ended September 30, 2018 unless otherwise indicated.
MOBILE MODULAR
For the third quarter of 2019, the Company’s Mobile Modular division reported income from operations of $22.2 million, an increase of $3.0 million, or 16%. Rental revenues increased 13% to $46.7 million, depreciation expense increased 5% to $5.6 million and other direct costs increased 20% to $12.8 million, which resulted in an increase in gross profit on rental revenues of 12% to $28.4 million. Rental related services revenues increased 39% to $22.6 million, with associated gross profit increasing 55% to $5.8 million. Sales revenues decreased 3% to $16.7 million while gross margin on sales increased to 28% from 24%, resulting in a 13% increase in gross profit on sales revenues to $4.7 million. Selling and administrative expenses increased 19% to $17.0 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.
TRS-RENTELCO
For the third quarter of 2019, the Company’s TRS-RenTelco division reported income from operations of $10.1 million, an increase of $2.4 million, or 32%. Rental revenues increased 21% to $26.9 million, depreciation expense increased 19% to $10.8 million and other direct costs increased 9% to $4.1 million, which resulted in a 28% increase in gross profit on rental revenues to $12.0 million. Sales revenues increased 25% to $5.7 million. Gross margin on sales decreased to 60% from 63%, resulting in an 18% increase in gross profit on sales revenues to $3.4 million. Selling and administrative expenses increased 16% to $6.0 million, primarily due to higher allocated corporate expenses and increased salaries and employee benefit costs.
ADLER TANKS
For the third quarter of 2019, the Company’s Adler Tanks division reported income from operations of $5.1 million, a decrease of $0.4 million, or 7%. Rental revenues decreased 8% to $17.2 million, depreciation expense increased 3% to $4.1 million and other direct costs decreased 15% to $2.8 million, which resulted in a decrease in gross profit on rental revenues of 10% to $10.3 million. Rental related services revenues increased 7% to $7.4 million, with gross profit on rental related services increasing 28% to $1.9 million. Selling and administrative expenses decreased 6% to $7.2 million, primarily due to decreased salaries and employee benefit costs.
FINANCIAL OUTLOOK:
Based upon the Company’s year-to-date results and current outlook for the remainder of the year, the Company is raising its financial outlook and expects its 2019 total operating profit to increase 15% to 19% above 2018 results, as compared to our prior expectation of a 9% to 14% increase.
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.comModular Buildings – www.mobilemodular.comElectronic Test Equipment – www.trsrentelco.comTanks and Boxes – www.adlertankrentals.comPortable Storage – www.mobilemodularcontainers.comSchool 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, 2019, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on October 29, 2019 to discuss the third 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 8298548. 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 “believes,” “expects,” “will,” or “anticipates” or the negative of these terms or other comparable terminology. In particular, Mr. Hanna’s comments on remaining positive about the Company’s overall momentum entering the fourth quarter, economic fundamentals remaining healthy with good activity levels, finishing 2019 on solid footing, as well as the updated full year 2019 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 extent of the recovery underway in our modular building division; the state of the wireless communications network upgrade environment; 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 RENTCORPCONDENSED CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (in thousands, except per share amounts) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Revenues | ||||||||||||||||
| Rental | $ | 90,857 | $ | 82,155 | $ | 261,658 | $ | 233,683 | ||||||||
| Rental related services | 30,816 | 23,880 | 76,738 | 60,797 | ||||||||||||
| Rental operations | 121,673 | 106,035 | 338,396 | 294,480 | ||||||||||||
| Sales | 50,855 | 36,085 | 81,387 | 67,722 | ||||||||||||
| Other | 1,034 | 1,027 | 3,226 | 3,013 | ||||||||||||
| Total revenues | 173,562 | 143,147 | 423,009 | 365,215 | ||||||||||||
| Costs and Expenses | ||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||
| Depreciation of rental equipment | 20,535 | 18,407 | 59,222 | 54,287 | ||||||||||||
| Rental related services | 23,007 | 18,618 | 57,507 | 47,404 | ||||||||||||
| Other | 19,654 | 17,674 | 61,128 | 52,696 | ||||||||||||
| Total direct costs of rental operations | 63,196 | 54,699 | 177,857 | 154,387 | ||||||||||||
| Costs of sales | 32,084 | 24,398 | 49,984 | 42,680 | ||||||||||||
| Total costs of revenues | 95,280 | 79,097 | 227,841 | 197,067 | ||||||||||||
| Gross profit | 78,282 | 64,050 | 195,168 | 168,148 | ||||||||||||
| Selling and administrative expenses | 31,534 | 28,226 | 92,044 | 85,833 | ||||||||||||
| Income from operations | 46,748 | 35,824 | 103,124 | 82,315 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (3,161 | ) | (3,142 | ) | (9,407 | ) | (9,133 | ) | ||||||||
| Foreign currency exchange loss | (132 | ) | (129 | ) | (46 | ) | (505 | ) | ||||||||
| Income before provision for income taxes | 43,455 | 32,553 | 93,671 | 72,677 | ||||||||||||
| Provision for income taxes | 10,987 | 7,774 | 23,266 | 17,520 | ||||||||||||
| Net income | $ | 32,468 | $ | 24,779 | $ | 70,405 | $ | 55,157 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 1.34 | $ | 1.03 | $ | 2.90 | $ | 2.29 | ||||||||
| Diluted | $ | 1.32 | $ | 1.01 | $ | 2.86 | $ | 2.25 | ||||||||
| Shares used in per share calculation: | ||||||||||||||||
| Basic | 24,268 | 24,172 | 24,237 | 24,128 | ||||||||||||
| Diluted | 24,632 | 24,563 | 24,592 | 24,550 | ||||||||||||
| Cash dividends declared per share | $ | 0.375 | $ | 0.340 | $ | 1.125 | $ | 1.020 | ||||||||
MCGRATH RENTCORPCONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)
| September 30, | December 31, | |||||||
| (in thousands) | 2019 | 2018 | ||||||
| Assets | ||||||||
| Cash | $ | 2,290 | $ | 1,508 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2019 and 2018 | 138,114 | 121,016 | ||||||
| Rental equipment, at cost: | ||||||||
| Relocatable modular buildings | 865,254 | 817,375 | ||||||
| Electronic test equipment | 321,677 | 285,052 | ||||||
| Liquid and solid containment tanks and boxes | 315,838 | 313,573 | ||||||
| 1,502,769 | 1,416,000 | |||||||
| Less accumulated depreciation | (544,159 | ) | (514,985 | ) | ||||
| Rental equipment, net | 958,610 | 901,015 | ||||||
| Property, plant and equipment, net | 127,977 | 126,899 | ||||||
| Prepaid expenses and other assets | 43,553 | 31,816 | ||||||
| Intangible assets, net | 7,554 | 7,254 | ||||||
| Goodwill | 28,125 | 27,808 | ||||||
| Total assets | $ | 1,306,223 | $ | 1,217,316 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Liabilities: | ||||||||
| Notes payable | $ | 301,469 | $ | 298,564 | ||||
| Accounts payable and accrued liabilities | 111,320 | 90,844 | ||||||
| Deferred income | 60,775 | 49,709 | ||||||
| Deferred income taxes, net | 215,944 | 206,664 | ||||||
| Total liabilities | 689,508 | 645,781 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value - Authorized 40,000 shares | ||||||||
| Issued and outstanding - 24,285 shares as of September 30, 2019 and 24,182 shares as of December 31, 2018 | 106,033 | 103,801 | ||||||
| Retained earnings | 510,702 | 467,783 | ||||||
| Accumulated other comprehensive loss | (20 | ) | (49 | ) | ||||
| Total shareholders’ equity | 616,715 | 571,535 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,306,223 | $ | 1,217,316 | ||||
MCGRATH RENTCORPCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)
| Nine Months Ended September 30, | ||||||||
| (in thousands) | 2019 | 2018 | ||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 70,405 | $ | 55,157 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 65,960 | 60,896 | ||||||
| Impairment of rental assets | — | 39 | ||||||
| Provision for doubtful accounts | 655 | 297 | ||||||
| Share-based compensation | 4,096 | 2,810 | ||||||
| Gain on sale of used rental equipment | (15,168 | ) | (15,044 | ) | ||||
| Foreign currency exchange loss | 46 | 505 | ||||||
| Amortization of debt issuance costs | 8 | 18 | ||||||
| Change in: | ||||||||
| Accounts receivable | (16,929 | ) | (9,514 | ) | ||||
| Prepaid expenses and other assets | (11,734 | ) | (10,195 | ) | ||||
| Accounts payable and accrued liabilities | 19,304 | 148 | ||||||
| Deferred income | 10,946 | 8,741 | ||||||
| Deferred income taxes | 9,280 | 2,982 | ||||||
| Net cash provided by operating activities | 136,869 | 96,840 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of rental equipment | (127,243 | ) | (84,658 | ) | ||||
| Purchases of property, plant and equipment | (6,845 | ) | (12,521 | ) | ||||
| Cash paid for acquisition of business assets | (7,401 | ) | (7,543 | ) | ||||
| Proceeds from sales of used rental equipment | 30,844 | 30,067 | ||||||
| Net cash used in investing activities | (110,645 | ) | (74,655 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net borrowings under bank lines of credit | 2,897 | 25,575 | ||||||
| Principal payments on Series A senior notes | — | (20,000 | ) | |||||
| Taxes paid related to net share settlement of stock awards | (1,864 | ) | (3,004 | ) | ||||
| Payment of dividends | (26,432 | ) | (22,719 | ) | ||||
| Net cash used in financing activities | (25,399 | ) | (20,148 | ) | ||||
| Effect of foreign currency exchange rate changes on cash | (43 | ) | (139 | ) | ||||
| Net increase in cash | 782 | 1,898 | ||||||
| Cash balance, beginning of period | 1,508 | 2,501 | ||||||
| Cash balance, end of period | $ | 2,290 | $ | 4,399 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Interest paid, during the period | $ | 9,359 | $ | 9,193 | ||||
| Net income taxes paid, during the period | $ | 10,030 | $ | 16,055 | ||||
| Dividends accrued during the period, not yet paid | $ | 9,241 | $ | 8,349 | ||||
| Rental equipment acquisitions, not yet paid | $ | 9,450 | $ | 9,643 | ||||
| MCGRATH RENTCORP | ||||||||||||||||||||
| BUSINESS SEGMENT DATA (unaudited) | ||||||||||||||||||||
| Three months ended September 30, 2019 | ||||||||||||||||||||
| (dollar amounts in thousands) | MobileModular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 46,738 | $ | 26,938 | $ | 17,181 | $ | — | $ | 90,857 | ||||||||||
| Rental related services | 22,574 | 863 | 7,379 | — | 30,816 | |||||||||||||||
| Rental operations | 69,312 | 27,801 | 24,560 | — | 121,673 | |||||||||||||||
| Sales | 16,676 | 5,678 | 140 | 28,361 | 50,855 | |||||||||||||||
| Other | 314 | 611 | 109 | — | 1,034 | |||||||||||||||
| Total revenues | 86,302 | 34,090 | 24,809 | 28,361 | 173,562 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 5,572 | 10,849 | 4,114 | — | 20,535 | |||||||||||||||
| Rental related services | 16,799 | 695 | 5,513 | — | 23,007 | |||||||||||||||
| Other | 12,804 | 4,088 | 2,762 | — | 19,654 | |||||||||||||||
| Total direct costs of rental operations | 35,175 | 15,632 | 12,389 | — | 63,196 | |||||||||||||||
| Costs of sales | 11,963 | 2,277 | 126 | 17,718 | 32,084 | |||||||||||||||
| Total costs of revenues | 47,138 | 17,909 | 12,515 | 17,718 | 95,280 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 28,362 | 12,001 | 10,305 | — | 50,668 | |||||||||||||||
| Rental related services | 5,775 | 168 | 1,866 | — | 7,809 | |||||||||||||||
| Rental operations | 34,137 | 12,169 | 12,171 | — | 58,477 | |||||||||||||||
| Sales | 4,713 | 3,401 | 14 | 10,643 | 18,771 | |||||||||||||||
| Other | 314 | 611 | 109 | — | 1,034 | |||||||||||||||
| Total gross profit | 39,164 | 16,181 | 12,294 | 10,643 | 78,282 | |||||||||||||||
| Selling and administrative expenses | 16,966 | 6,038 | 7,160 | 1,370 | 31,534 | |||||||||||||||
| Income from operations | $ | 22,198 | $ | 10,143 | $ | 5,134 | $ | 9,273 | 46,748 | |||||||||||
| Interest expense | (3,161 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (132 | ) | ||||||||||||||||||
| Provision for income taxes | (10,987 | ) | ||||||||||||||||||
| Net income | $ | 32,468 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 802,718 | $ | 314,428 | $ | 314,314 | ||||||||||||||
| Average monthly total yield 2 | 1.94 | % | 2.86 | % | 1.82 | % | ||||||||||||||
| Average utilization 3 | 79.4 | % | 66.9 | % | 54.5 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.45 | % | 4.27 | % | 3.34 | % | ||||||||||||||
- 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 September 30, 2018 | ||||||||||||||||||||
| (dollar amounts in thousands) | MobileModular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 41,205 | $ | 22,225 | $ | 18,725 | $ | — | $ | 82,155 | ||||||||||
| Rental related services | 16,188 | 773 | 6,919 | — | 23,880 | |||||||||||||||
| Rental operations | 57,393 | 22,998 | 25,644 | — | 106,035 | |||||||||||||||
| Sales | 17,140 | 4,549 | 294 | 14,102 | 36,085 | |||||||||||||||
| Other | 358 | 590 | 79 | — | 1,027 | |||||||||||||||
| Total revenues | 74,891 | 28,137 | 26,017 | 14,102 | 143,147 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 5,320 | 9,093 | 3,994 | — | 18,407 | |||||||||||||||
| Rental related services | 12,457 | 697 | 5,464 | — | 18,618 | |||||||||||||||
| Other | 10,662 | 3,767 | 3,245 | — | 17,674 | |||||||||||||||
| Total direct costs of rental operations | 28,439 | 13,557 | 12,703 | — | 54,699 | |||||||||||||||
| Costs of sales | 12,987 | 1,667 | 195 | 9,549 | 24,398 | |||||||||||||||
| Total costs of revenues | 41,426 | 15,224 | 12,898 | 9,549 | 79,097 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 25,223 | 9,365 | 11,486 | — | 46,074 | |||||||||||||||
| Rental related services | 3,731 | 76 | 1,455 | — | 5,262 | |||||||||||||||
| Rental operations | 28,954 | 9,441 | 12,941 | — | 51,336 | |||||||||||||||
| Sales | 4,153 | 2,882 | 99 | 4,553 | 11,687 | |||||||||||||||
| Other | 358 | 590 | 79 | — | 1,027 | |||||||||||||||
| Total gross profit | 33,465 | 12,913 | 13,119 | 4,553 | 64,050 | |||||||||||||||
| Selling and administrative expenses | 14,261 | 5,220 | 7,587 | 1,158 | 28,226 | |||||||||||||||
| Income from operations | $ | 19,204 | $ | 7,693 | $ | 5,532 | $ | 3,395 | 35,824 | |||||||||||
| Interest expense | (3,142 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (129 | ) | ||||||||||||||||||
| Provision for income taxes | (7,774 | ) | ||||||||||||||||||
| Net income | $ | 24,779 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 759,542 | $ | 280,377 | $ | 311,086 | ||||||||||||||
| Average monthly total yield 2 | 1.81 | % | 2.64 | % | 2.01 | % | ||||||||||||||
| Average utilization 3 | 78.6 | % | 61.9 | % | 62.5 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.30 | % | 4.27 | % | 3.21 | % | ||||||||||||||
- 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) | ||||||||||||||||||||
| Nine months ended September 30, 2019 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 133,736 | $ | 76,050 | $ | 51,872 | $ | — | $ | 261,658 | ||||||||||
| Rental related services | 52,946 | 2,425 | 21,367 | — | 76,738 | |||||||||||||||
| Rental operations | 186,682 | 78,475 | 73,239 | — | 338,396 | |||||||||||||||
| Sales | 31,401 | 16,745 | 1,003 | 32,238 | 81,387 | |||||||||||||||
| Other | 1,033 | 1,856 | 337 | — | 3,226 | |||||||||||||||
| Total revenues | 219,116 | 97,076 | 74,579 | 32,238 | 423,009 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 16,449 | 30,533 | 12,240 | — | 59,222 | |||||||||||||||
| Rental related services | 39,454 | 2,008 | 16,045 | — | 57,507 | |||||||||||||||
| Other | 39,721 | 12,206 | 9,201 | — | 61,128 | |||||||||||||||
| Total direct costs of rental operations | 95,624 | 44,747 | 37,486 | — | 177,857 | |||||||||||||||
| Costs of sales | 21,463 | 7,656 | 713 | 20,152 | 49,984 | |||||||||||||||
| Total costs of revenues | 117,087 | 52,403 | 38,199 | 20,152 | 227,841 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 77,566 | 33,311 | 30,431 | — | 141,308 | |||||||||||||||
| Rental related services | 13,492 | 417 | 5,322 | — | 19,231 | |||||||||||||||
| Rental operations | 91,058 | 33,728 | 35,753 | — | 160,539 | |||||||||||||||
| Sales | 9,938 | 9,089 | 290 | 12,086 | 31,403 | |||||||||||||||
| Other | 1,033 | 1,856 | 337 | — | 3,226 | |||||||||||||||
| Total gross profit | 102,029 | 44,673 | 36,380 | 12,086 | 195,168 | |||||||||||||||
| Selling and administrative expenses | 48,013 | 18,101 | 22,054 | 3,876 | 92,044 | |||||||||||||||
| Income from operations | $ | 54,016 | $ | 26,572 | $ | 14,326 | $ | 8,210 | 103,124 | |||||||||||
| Interest expense | (9,407 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (46 | ) | ||||||||||||||||||
| Provision for income taxes | (23,266 | ) | ||||||||||||||||||
| Net income | $ | 70,405 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 789,664 | $ | 299,210 | $ | 313,475 | ||||||||||||||
| Average monthly total yield 2 | 1.88 | % | 2.82 | % | 1.84 | % | ||||||||||||||
| Average utilization 3 | 79.1 | % | 66.0 | % | 56.2 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.38 | % | 4.28 | % | 3.27 | % | ||||||||||||||
- 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) | ||||||||||||||||||||
| Nine months ended September 30, 2018 | ||||||||||||||||||||
| (dollar amounts in thousands) | Mobile Modular | TRS-RenTelco | Adler Tanks | Enviroplex | Consolidated | |||||||||||||||
| Revenues | ||||||||||||||||||||
| Rental | $ | 116,436 | $ | 65,919 | $ | 51,328 | $ | — | $ | 233,683 | ||||||||||
| Rental related services | 40,510 | 2,287 | 18,000 | — | 60,797 | |||||||||||||||
| Rental operations | 156,946 | 68,206 | 69,328 | — | 294,480 | |||||||||||||||
| Sales | 30,694 | 16,568 | 629 | 19,831 | 67,722 | |||||||||||||||
| Other | 973 | 1,753 | 287 | — | 3,013 | |||||||||||||||
| Total revenues | 188,613 | 86,527 | 70,244 | 19,831 | 365,215 | |||||||||||||||
| Costs and Expenses | ||||||||||||||||||||
| Direct costs of rental operations: | ||||||||||||||||||||
| Depreciation | 15,841 | 26,536 | 11,910 | — | 54,287 | |||||||||||||||
| Rental related services | 31,031 | 1,956 | 14,417 | — | 47,404 | |||||||||||||||
| Other | 33,460 | 10,834 | 8,402 | — | 52,696 | |||||||||||||||
| Total direct costs of rental operations | 80,332 | 39,326 | 34,729 | — | 154,387 | |||||||||||||||
| Costs of sales | 21,766 | 7,046 | 484 | 13,384 | 42,680 | |||||||||||||||
| Total costs of revenues | 102,098 | 46,372 | 35,213 | 13,384 | 197,067 | |||||||||||||||
| Gross Profit | ||||||||||||||||||||
| Rental | 67,134 | 28,549 | 31,017 | — | 126,700 | |||||||||||||||
| Rental related services | 9,479 | 331 | 3,583 | — | 13,393 | |||||||||||||||
| Rental operations | 76,613 | 28,880 | 34,600 | — | 140,093 | |||||||||||||||
| Sales | 8,929 | 9,522 | 144 | 6,447 | 25,042 | |||||||||||||||
| Other | 973 | 1,753 | 287 | — | 3,013 | |||||||||||||||
| Total gross profit | 86,515 | 40,155 | 35,031 | 6,447 | 168,148 | |||||||||||||||
| Selling and administrative expenses | 43,191 | 16,780 | 22,245 | 3,617 | 85,833 | |||||||||||||||
| Income from operations | $ | 43,324 | $ | 23,375 | $ | 12,786 | $ | 2,830 | 82,315 | |||||||||||
| Interest expense | (9,133 | ) | ||||||||||||||||||
| Foreign currency exchange loss | (505 | ) | ||||||||||||||||||
| Provision for income taxes | (17,520 | ) | ||||||||||||||||||
| Net income | $ | 55,157 | ||||||||||||||||||
| Other Information | ||||||||||||||||||||
| Average rental equipment 1 | $ | 752,076 | $ | 273,142 | $ | 309,943 | ||||||||||||||
| Average monthly total yield 2 | 1.72 | % | 2.68 | % | 1.84 | % | ||||||||||||||
| Average utilization 3 | 77.8 | % | 62.4 | % | 59.8 | % | ||||||||||||||
| Average monthly rental rate 4 | 2.21 | % | 4.29 | % | 3.08 | % | ||||||||||||||
- 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 EndedSeptember 30, | Nine Months EndedSeptember 30, | Twelve Months EndedSeptember 30, | |||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
| Net income | $ | 32,468 | $ | 24,779 | $ | 70,405 | $ | 55,157 | $ | 94,654 | $ | 172,881 | ||||||||||||
| Provision (benefit) for income taxes | 10,987 | 7,774 | 23,266 | 17,520 | 31,035 | (76,255 | ) | |||||||||||||||||
| Interest expense | 3,161 | 3,142 | 9,407 | 9,133 | 12,571 | 12,031 | ||||||||||||||||||
| Depreciation and amortization | 22,873 | 20,608 | 65,960 | 60,896 | 87,039 | 80,887 | ||||||||||||||||||
| EBITDA | 69,489 | 56,303 | 169,038 | 142,706 | 225,299 | 189,544 | ||||||||||||||||||
| Impairment of rental assets | — | — | — | 39 | — | 1,678 | ||||||||||||||||||
| Share-based compensation | 1,350 | 982 | 4,096 | 2,810 | 5,397 | 3,763 | ||||||||||||||||||
| Adjusted EBITDA 1 | $ | 70,839 | $ | 57,285 | $ | 173,134 | $ | 145,555 | $ | 230,696 | $ | 194,985 | ||||||||||||
| Adjusted EBITDA margin 2 | 41 | % | 40 | % | 41 | % | 40 | % | 41 | % | 40 | % | ||||||||||||
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities
| (dollar amounts in thousands) | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30, | Twelve Months EndedSeptember 30, | |||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
| Adjusted EBITDA 1 | $ | 70,839 | $ | 57,285 | $ | 173,134 | $ | 145,555 | $ | 230,696 | $ | 194,985 | ||||||||||||
| Interest paid | (3,149 | ) | (3,070 | ) | (9,359 | ) | (9,193 | ) | (12,764 | ) | (12,455 | ) | ||||||||||||
| Income taxes paid, net of refunds received | (3,857 | ) | (4,380 | ) | (10,030 | ) | (16,055 | ) | (12,132 | ) | (22,049 | ) | ||||||||||||
| Gain on sale of used rental equipment | (6,000 | ) | (5,169 | ) | (15,168 | ) | (15,044 | ) | (19,683 | ) | (19,771 | ) | ||||||||||||
| Foreign currency exchange loss | 132 | 129 | 46 | 505 | 30 | 444 | ||||||||||||||||||
| Amortization of debt issuance cost | 3 | 3 | 8 | 18 | 10 | 30 | ||||||||||||||||||
| Change in certain assets and liabilities: | ||||||||||||||||||||||||
| Accounts receivable, net | (16,272 | ) | (9,994 | ) | (16,274 | ) | (9,217 | ) | (22,201 | ) | (7,676 | ) | ||||||||||||
| Prepaid expenses and other assets | 9,512 | 4,743 | (11,734 | ) | (10,195 | ) | (10,890 | ) | (5,810 | ) | ||||||||||||||
| Accounts payable and other liabilities | (363 | ) | (359 | ) | 15,300 | 1,725 | 17,167 | 4,618 | ||||||||||||||||
| Deferred income | (5,963 | ) | 3,887 | 10,946 | 8,741 | 12,463 | 5,772 | |||||||||||||||||
| Net cash provided by operating activities | $ | 44,882 | $ | 43,075 | $ | 136,869 | $ | 96,840 | $ | 182,696 | $ | 138,088 | ||||||||||||
- 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. PrattEVP & Chief Financial Officer 925-606-9200
