LIVERMORE, Calif., May 01, 2018 (GLOBE NEWSWIRE) -- McGrath RentCorp (NASDAQ:MGRC) (the “Company”), a diversified business to business rental company, today announced total revenues for the quarter ended March 31, 2018 of $105.1 million, an increase of 11%, compared to the first quarter of 2017.  The Company reported net income of $14.5 million, or $0.59 per diluted share for the first quarter of 2018, compared to net income of $8.0 million, or $0.33 per diluted share, in the first quarter of 2017.  The first quarter of 2018 includes a net income benefit associated with the Tax Cuts and Jobs Act (“the Tax Act”) that was enacted in December 2017.  The Tax Act reduces the U.S. federal corporate statutory rate from 35% to 21%, which contributed $0.11 to earnings per diluted share in the first quarter 2018.

FIRST QUARTER 2018 COMPANY HIGHLIGHTS:

  • Income from operations increased 39% year-over-year to $22.0 million.
  • Rental revenues increased 9% year-over-year to $74.3 million.
  • Adjusted EBITDA1 increased 18% year-over-year to $42.8 million.   
  • Dividend rate increased 31% year-over-year to $0.34 per share for the first quarter of 2018.  On an annualized basis, this dividend represents a 2.3% yield on the April 30, 2018 close price of $58.93 per share.

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

“Our first quarter results are a positive start to the year. Overall operating profit increased by 39%, driven by growth in rental gross profit of $5.0 million and sales gross profit of $1.3 million.  Demand was broad based across each of our divisions as the economy continued to show positive momentum.

Mobile Modular rental revenues for the quarter increased 10% from a year ago, primarily driven by 9% improvement in average rental rates.  Rental revenue growth continued to be healthy across commercial and education markets.  Portable Storage rental revenues grew by 15% on strong demand from construction projects.  Modular sales revenues increased significantly year-over-year, primarily due to higher used equipment sales.

TRS-RenTelco rental revenues for the quarter increased 9%, primarily driven by 7% higher average rental equipment and improved utilization.  Demand for both communications and general purpose test equipment continued the healthy trends experienced in late 2017. 

Adler Tank Rentals rental revenues for the quarter increased 8% from a year ago.  Rental revenue growth occurred across a mix of vertical markets, including upstream oil and natural gas, which increased from 6% to 10% of total rental revenues. Utilization improved as average equipment on rent increased 11%. Due to ongoing competitive price pressure, average rental rates declined slightly.

We continue to execute on our performance improvement initiatives.  We are driving better performance from our fleet without significant new equipment investments and we are encouraged by our progress.  

Now that our first quarter is completed, we have established a good foundation for the remainder of the year.” 

  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 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 March 31, 2018 to the quarter ended March 31, 2017 unless otherwise indicated.

MOBILE MODULAR

For the first quarter of 2018, the Company’s Mobile Modular division reported income from operations of $12.3 million, an increase of $3.7 million, or 42%.  Rental revenues increased 10% to $37.0 million, depreciation expense decreased 2% to $5.2 million and other direct costs increased 7% to $10.3 million, which resulted in an increase in gross profit on rental revenues of 15% to $21.4 million.  Rental related services revenues increased 3% to $11.9 million, with associated gross profit increasing 4% to $2.9 million.  Sales revenues increased 55% to $4.6 million.  Gross margin on sales increased to 36% from 30% in 2017 due to higher margins on used equipment sales, resulting in a twofold increase in gross profit on sales revenues to $1.7 million.  Selling and administrative expenses increased 2% to $14.0 million, primarily due to increased salaries and employee benefit costs.

TRS-RENTELCO

For the first quarter of 2018, the Company’s TRS-RenTelco division reported income from operations of $7.2 million, an increase of $1.5 million, or 27%.  Rental revenues increased 9% to $21.5 million, depreciation expense increased 6% to $8.6 million and other direct costs increased 5% to $3.5 million, which resulted in an increase in gross profit on rental revenues of 14% to $9.4 million.  Sales revenues increased 18% to $5.2 million.  Gross margin on sales decreased to 52% from 57% in 2017 primarily due to lower margins on used equipment sales, resulting in an 8% increase in gross profit on sales revenues to $2.7 million.  Selling and administrative expenses decreased 1% to $5.6 million.

ADLER TANKS

For the first quarter of 2018, the Company’s Adler Tanks division reported income from operations of $3.2 million, an increase of $0.9 million, or 40%.  Rental revenues increased 8% to $15.7 million, depreciation expense was flat at $3.9 million and other direct costs increased 2% to $2.4 million, which together resulted in an increase in gross profit on rental revenues of 13% to $9.3 million.  Rental related services revenues decreased 11% to $5.1 million, with gross profit on rental related services decreasing 23% to $1.0 million.  Selling and administrative expenses decreased 1% to $7.2 million.

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 2018 total operating profit to increase 11% to 15% above 2017 results, as compared to our prior expectation of an 8% to 12% increase.   

ABOUT MCGRATH RENTCORP:

Founded in 1979, McGrath RentCorp is a diversified business-to-business rental company with four rental divisions.  Mobile Modular rents and sells modular buildings to fulfill customers' temporary and permanent classroom and office space needs in California, Texas, Florida, and the Mid-Atlantic from Washington D.C. to Georgia.  TRS-RenTelco rents and sells electronic test equipment and is one of the leading rental providers of general purpose and communications test equipment in the Americas.  Adler Tank Rentals rents and sells containment solutions for hazardous and nonhazardous liquids and solids with operations serving key markets throughout the United States.  Mobile Modular Portable Storage provides portable storage solutions in the California, Texas, Florida, Northern Illinois, New Jersey, North Carolina and Georgia markets.  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 April 2, 2018, McGrath RentCorp will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on May 1, 2018 to discuss the first quarter 2018 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 7-day replay will be available following the call by dialing 1-855-859-2056 (in the U.S.), or 1-404-537-3406 (outside the U.S.).  The pass code for the call replay is 6888595.  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 comment that the Company’s businesses have established a good foundation for the remainder of 2018, and the full year 2018 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; the potential for continuing softness in communications test equipment rental demand in our electronics division; 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 March 31, 
(in thousands, except per share amounts) 2018  2017 
Revenues        
Rental $74,261  $67,978 
Rental related services  17,831   17,935 
Rental operations  92,092   85,913 
Sales  12,091   8,295 
Other  902   629 
Total revenues  105,085   94,837 
Costs and Expenses        
Direct costs of rental operations:        
Depreciation of rental equipment  17,777   17,379 
Rental related services  13,768   13,833 
Other  16,269   15,359 
Total direct costs of rental operations  47,814   46,571 
Costs of sales  7,101   4,596 
Total costs of revenues  54,915   51,167 
Gross profit  50,170   43,670 
Selling and administrative expenses  28,128   27,848 
Income from operations  22,042   15,822 
Other income (expense):        
Interest expense  (2,992)  (2,789)
Foreign currency exchange gain (loss)  (32)  226 
Income before provision for income taxes  19,018   13,259 
Provision for income taxes  4,552   5,286 
Net income $14,466  $7,973 
Earnings per share:        
Basic $0.60  $0.33 
Diluted $0.59  $0.33 
Shares used in per share calculation:        
Basic  24,067   23,950 
Diluted  24,478   24,232 
Cash dividends declared per share $0.340  $0.260 
         


MCGRATH RENTCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
       
  March 31,  December 31, 
(in thousands) 2018  2017 
Assets        
Cash $4,448  $2,501 
Accounts receivable, net of allowance for doubtful accounts of $1,883 in 2018
  and $1,920 in 2017
  98,092   105,872 
Rental equipment, at cost:        
Relocatable modular buildings  779,839   775,400 
Electronic test equipment  269,043   262,325 
Liquid and solid containment tanks and boxes  310,478   309,808 
   1,359,360   1,347,533 
Less accumulated depreciation  (494,022)  (485,213)
Rental equipment, net  865,338   862,320 
Property, plant and equipment, net  119,904   119,170 
Prepaid expenses and other assets  25,762   22,459 
Intangible assets, net  7,506   7,724 
Goodwill  27,808   27,808 
Total assets $1,148,858  $1,147,854 
Liabilities and Shareholders' Equity        
Liabilities:        
Notes payable $300,595  $303,414 
Accounts payable and accrued liabilities  84,666   86,408 
Deferred income  38,502   39,219 
Deferred income taxes, net  194,811   194,629 
Total liabilities  618,574   623,670 
Shareholders’ equity:        
Common stock, no par value - Authorized 40,000 shares        
Issued and outstanding - 24,102 shares as of March 31, 2018 and 24,052 shares as of December 31, 2017  102,840   102,947 
Retained earnings  427,634   421,405 
Accumulated other comprehensive loss  (190)  (168)
Total shareholders’ equity  530,284   524,184 
Total liabilities and shareholders’ equity $1,148,858  $1,147,854 
         



MCGRATH RENTCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
    
  Three Months Ended March 31, 
(in thousands) 2018  2017 
Cash Flows from Operating Activities :        
Net income $14,466  $7,973 
Adjustments to reconcile net income to net cash provided by
  operating activities:
        
Depreciation and amortization  19,928   19,405 
Impairment of rental assets  39    
Provision for doubtful accounts  35   289 
Share-based compensation  864   806 
Gain on sale of used rental equipment  (3,848)  (2,943)
Foreign currency exchanges (gain) loss  32   (226)
Amortization of debt issuance costs  13   13 
Change in:        
Accounts receivable  7,745   4,036 
Prepaid expenses and other assets  (3,303)  (1,536)
Accounts payable and accrued liabilities  (4,284)  (3,924)
Deferred income  (717)  2,388 
Deferred income taxes  182   (451)
Net cash provided by operating activities  31,152   25,830 
Cash Flows from Investing Activities:        
Purchases of rental equipment  (24,168)  (15,914)
Purchases of property, plant and equipment  (2,667)  (5,835)
Proceeds from sales of used rental equipment  7,707   5,505 
Net cash used in investing activities  (19,128)  (16,244)
Cash Flows from Financing Activities:        
Net repayments under bank lines of credit  (2,831)  (2,436)
Taxes paid related to net share settlement of stock awards  (971)  (143)
Payment of dividends  (6,300)  (6,155)
Net cash used in financing activities  (10,102)  (8,734)
Effect of foreign currency exchange rate changes on cash  25   (24)
Net increase in cash  1,947   828 
Cash balance, beginning of period  2,501   852 
Cash balance, end of period $4,448  $1,680 
Supplemental Disclosure of Cash Flow Information:        
Interest paid, during the period $2,537  $2,303 
Net income taxes paid, during the period $1,572  $5,565 
Dividends accrued during the period, not yet paid $8,237  $6,190 
Rental equipment acquisitions, not yet paid $6,930  $7,513 
         


MCGRATH RENTCORP                    
BUSINESS SEGMENT DATA (unaudited)                    
Three months ended March 31, 2018                    
(dollar amounts in thousands) Mobile
Modular
  TRS-
RenTelco
  Adler Tanks  Enviroplex  Consolidated 
Revenues                    
Rental $37,027  $21,529  $15,705  $  $74,261 
Rental related services  11,934   807   5,090      17,831 
Rental operations  48,961   22,336   20,795      92,092 
Sales  4,593   5,175   305   2,018   12,091 
Other  297   527   78      902 
Total revenues  53,851   28,038   21,178   2,018   105,085 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  5,248   8,577   3,952      17,777 
Rental related services  9,019   621   4,128      13,768 
Other  10,331   3,504   2,434      16,269 
Total direct costs of rental operations  24,598   12,702   10,514      47,814 
Costs of  sales  2,932   2,488   268   1,413   7,101 
Total costs of revenues  27,530   15,190   10,782   1,413   54,915 
                   - 
Gross Profit                  - 
Rental  21,448   9,448   9,319      40,215 
Rental related services  2,915   186   962      4,063 
Rental operations  24,363   9,634   10,281      44,278 
Sales  1,661   2,687   37   605   4,990 
Other  297   527   78      902 
Total gross profit  26,321   12,848   10,396   605   50,170 
Selling and administrative expenses  14,012   5,618   7,198   1,300   28,128 
Income (loss) from operations $12,309  $7,230  $3,198  $(695) $22,042 
Interest expense                  (2,992)
Foreign currency exchange loss                  (32)
Provision for income taxes                  (4,552)
Net income                 $14,466 
                     
Other Information                    
Average rental equipment 1 $746,186  $264,325  $308,920         
Average monthly total yield 2  1.65%  2.71%  1.69%        
Average utilization 3  77.3%  62.7%  57.6%        
Average monthly rental rate 4  2.14%  4.33%  2.94%        
                     
  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 March 31, 2017                    
(dollar amounts in thousands) Mobile
Modular
  TRS-
RenTelco
  Adler Tanks  Enviroplex  Consolidated 
Revenues                    
Rental $33,654  $19,746  $14,578  $  $67,978 
Rental related services  11,588   658   5,689      17,935 
Rental operations  45,242   20,404   20,267      85,913 
Sales  2,964   4,383   189   759   8,295 
Other  97   527   5      629 
Total revenues  48,303   25,314   20,461   759   94,837 
                     
Costs and Expenses                    
Direct costs of rental operations:                    
Depreciation  5,333   8,091   3,955      17,379 
Rental related services  8,797   597   4,439      13,833 
Other  9,647   3,333   2,379      15,359 
Total direct costs of rental operations  23,777   12,021   10,773      46,571 
Costs of  sales  2,082   1,900   133   481   4,596 
Total costs of revenues  25,859   13,921   10,906   481   51,167 
                     
Gross Profit                    
Rental  18,674   8,322   8,244      35,240 
Rental related services  2,791   61   1,250      4,102 
Rental operations  21,465   8,383   9,494      39,342 
Sales  882   2,483   56   278   3,699 
Other  97   527   5      629 
Total gross profit  22,444   11,393   9,555   278   43,670 
Selling and administrative expenses  13,800   5,689   7,267   1,092   27,848 
Income (loss) from operations $8,644  $5,704  $2,288  $(814)  15,822 
Interest expense                  (2,789)
Foreign currency exchange gain                  226 
Provision for income taxes                  (5,286)
Net income                 $7,973 
                     
Other Information                    
Average rental equipment 1 $744,641  $246,015  $306,817         
Average monthly total yield 2  1.51%  2.68%  1.58%        
Average utilization 3  76.8%  62.2%  52.3%        
Average monthly rental rate 4  1.96%  4.30%  3.03%        
                     
  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, 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
March 31,
 Twelve Months Ended
March 31,
 2018 2017 2018 2017
Net income$14,466  $7,973  $160,413  $39,658 
Provision (benefit) for income taxes 4,552   5,286   (71,202)  29,679 
Interest 2,992   2,789   11,825   11,440 
Depreciation and amortization 19,928   19,404   78,940   79,723 
EBITDA 41,938   35,452   179,976   160,500 
Impairment of rental assets 39      1,678    
Share-based compensation 864   806   3,256   3,041 
Adjusted EBITDA 1$42,841  $36,258  $184,910  $163,541 
Adjusted EBITDA margin 2 41%  38%  39%  38%
                


Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

(dollar amounts in thousands)Three Months Ended
March 31,
 Twelve Months Ended
March 31,
 2018 2017 2018 2017
Adjusted EBITDA 1$42,841  $36,258  $184,910  $163,541 
Interest paid (2,537)  (2,420)  (11,942)  (11,870)
Income taxes paid, net of refunds received (1,572)  (5,565)  (25,511)  (20,414)
Gain on sale of used rental equipment (3,848)  (2,943)  (18,638)  (13,716)
Foreign currency exchange loss (gain) 32   (226)  (76)  46 
Amortization of debt financing cost 13   13   50   52 
Change in certain assets and liabilities:               
Accounts receivable, net 7,780   4,325   (5,540)  (915)
Prepaid expenses and other assets (3,303)  (1,536)  1,357   (1,536)
Accounts payable and other liabilities (7,537)  (4,464)  4,679   10,370 
Deferred income (717)  2,388   (1,385)  2,388 
Net cash provided by operating activities$31,152  $25,830  $127,904  $127,946 
                
  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.
  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