View:
FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1996 Commission File No. 0-13292 McGRATH RENTCORP (Exact name of registrant as specified in its Charter) California 94-2579843 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2500 Grant Avenue San Lorenzo, California 94580 (Address of principal executive offices) Registrant's telephone number: (510) 276-2626 _________________________ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ _______ At May 1, 1996, 7,585,675 shares of Registrant's Common Stock were outstanding. _________________________ McGrath RentCorp First Quarter 1996 Form 10-Q Page 1 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended March 31, ----------------------- 1996 1995 ----------- ----------- REVENUES: Rental operations- Rental $11,557,798 $11,074,099 Rental related services 1,658,386 2,030,738 ----------- ----------- 13,216,184 13,104,837 Sales and related services 4,489,167 3,544,632 ----------- ----------- Total revenues 17,705,351 16,649,469 ----------- ----------- COSTS & EXPENSES: Direct costs of rental operations- Depreciation 3,005,653 2,754,380 Rental related services 1,026,590 1,175,651 Other 1,228,130 1,152,418 ----------- ----------- 5,260,373 5,082,449 Cost of sales and related services 3,100,825 2,328,899 ----------- ----------- 8,361,198 7,411,348 ----------- ----------- Gross margin 9,344,153 9,238,121 Selling and administrative expenses 3,610,473 3,302,686 ----------- ----------- Income from operations 5,733,680 5,935,435 Interest expense 635,274 675,454 ----------- ----------- Income before provision for income taxes 5,098,406 5,259,981 Provision for income taxes 2,024,829 2,083,012 ----------- ----------- Net income $ 3,073,577 $ 3,176,969 =========== =========== Net income per share $ 0.39 $ 0.38 =========== =========== The accompanying notes are an integral part of these financial statements. McGrath RentCorp First Quarter 1996 Form 10-Q Page 2 CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 1996 1995 ------------ ------------ ASSETS Cash $ 70,284 $ 221,075 Accounts receivable, less allowance for doubtful accounts of $605,000 in 1996 and in 1995 12,113,836 13,201,196 Rental equipment, at cost: Relocatable modular offices 146,444,288 146,867,850 Electronic test instruments 37,478,705 34,932,807 Accessory equipment 3,778,950 3,755,754 ------------ ------------ 187,701,943 185,556,411 Less - Accumulated depreciation (59,488,379) (57,948,456) ------------ ------------ 128,213,564 127,607,955 Land, at cost 19,489,300 19,489,300 Land improvements, furniture and equipment, at cost, less accumulated depreciation of $2,824,369 in 1996 and $2,708,404 in 1995 13,914,579 12,713,095 Prepaid expenses and other assets 1,755,564 1,897,700 ------------ ------------ $175,557,127 $175,130,321 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable $ 35,855,000 $ 37,080,000 Accounts payable and accrued liabilities 12,710,970 11,701,417 Deferred income 4,754,285 5,967,063 Deferred income taxes 36,302,720 34,488,695 ------------ ------------ Total liabilities 89,622,975 89,237,175 ------------ ------------ Shareholders' equity: Common stock, no par value - Authorized - 2O,OOO,OOO shares Outstanding - 7,693,315 shares in 1996 and 7,769,813 in 1995 6,950,308 8,913,311 Retained earnings 78,983,844 76,979,835 ------------ ------------ Total shareholders' equity 85,934,152 85,893,146 ------------ ------------ $175,557,127 $175,130,321 ============ ============ The accompanying notes are an integral part of these financial statements. McGrath RentCorp First Quarter 1996 Form 10-Q Page 3 CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in cash (Unaudited) Three months ended March 31, ----------------------- 1996 1995 ----------- ----------- Cash flows from operating activities: Net income $ 3,073,577 $ 3,176,969 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,178,949 3,208,414 Gain on sale of rental equipment (1,115,396) (906,519) Change in: Accounts receivable 1,087,360 1,039,808 Prepaids and other assets 142,136 (291,993) Accounts payable and accrued liabilities 875,338 405,812 Deferred income (1,212,778) (1,091,226) Deferred income taxes 1,814,025 1,583,171 ----------- ----------- Net cash provided by operating activities 7,843,211 7,124,436 ----------- ----------- Cash flows from investing activities: Purchase of rental equipment (5,501,792) (3,691,143) Purchase of land improvements, furniture and equipment (1,374,781) (2,841,304) Proceeds from sale of rental equipment 3,005,926 2,326,353 ----------- ----------- Net cash used in investing activities (3,870,647) (4,206,094) ----------- ----------- Cash flows from financing activities: Net borrowings (payments) under line of credit (1,225,000) (1,900,000) Proceeds from the exercise of stock options 252,125 26,865 Repurchase of common stock (2,215,127) (714,037) Payment of dividends (935,353) (900,344) ----------- ----------- Net cash used in financing activities (4,123,355) (3,487,516) ----------- ----------- Net increase (decrease) in cash (150,791) (569,174) Cash balance, beginning of period 221,075 1,151,648 ----------- ----------- Cash balance, end of period $ 70,284 $ 582,474 =========== =========== Interest paid during period $ 641,163 $ 700,880 =========== =========== Income taxes paid during period $ 210,804 $ --- =========== =========== Dividends declared but not yet paid $ 1,069,567 $ 977,940 =========== =========== The accompanying notes are an integral part of these financial statements. McGrath RentCorp First Quarter 1996 Form 10-Q Page 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 ------------------------------------------ 1. The consolidated financial information for the three months ended March 31, 1996 has not been audited, but in the opinion of management, all adjustments (consisting of only normal recurring accruals, consolidation and eliminating entries) necessary for the fair presentation of the consolidated results of operations, financial position, and cash flows of McGrath RentCorp (the "Company") have been made. The consolidated results of the three months ended March 31, 1996 should not be considered as necessarily indicative of the consolidated results for the entire year. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest Form 10-K. 2. The number of outstanding shares and equivalent shares used in the earnings per common share calculations were as follows: Quarter ended March 31, Primary Fully Diluted ----------------------- --------- ------------- 1996 7,878,185 7,881,295 1995 8,262,300 8,262,300 McGrath RentCorp First Quarter 1996 Form 10-Q Page 5 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Three Months Ended March 31, 1996 and 1995 Rental revenues for the first quarter of 1996 increased by $483,699, a 4% increase over the same period in 1995. The rental revenue increase from electronics of $819,584 was offset by a $335,885 decline in rental revenues from relocatable modular offices. Average utilization during the first quarter declined for electronic equipment from 56.7% to 54.7% and modular equipment from 75.5% to 70.0% compared to the same period in 1995. Rental related services for the three months ended March 31, 1996 decreased $372,352, an 18% decrease from the same period in 1995. The decrease was due primarily to fewer site work requirements experienced in 1996 and less incentive fees earned during the quarter for equipment management. Sales and related services for the three months ended March 31, 1996 increased $944,535, a 27% increase, compared to the same period in 1995. Sales and related services from quarter to quarter have fluctuated depending on customer requirements. Gross margins on sales and related services declined from 34% in 1995 to 31% in 1996. Selling and administrative expenses increased $307,787 (9%) for the three months ended March 31, 1996 compared to the same period in 1995 primarily due to increased staffing levels and personnel costs. Income before provision for taxes decreased $161,575 (3%) for the three months ended March 31, 1996 from the same period in 1995 with after tax income decreasing $103,392 (3%). Earnings per share for the quarter increased from $0.38 per share to $0.39 per share as a result of fewer outstanding shares. McGrath RentCorp First Quarter 1996 Form 10-Q Page 6 Liquidity and Capital Resources. The debt (notes payable) to equity ratio was 0.42 to 1 at March 31, 1996 compared to 0.43 to 1 at December 31, 1995. The debt (total liabilities) to equity ratio at the end of the current period and as of December 31, 1995 was 1.04 to 1. The Company continues to make purchases of shares of its common stock from time to time in the over-the-counter market (NASDQ) and/or through privately negotiated, large block transactions under an authorization of the Board of Directors. The Board of Directors believes the Company's shares are currently undervalued by the market and that the repurchase of its shares is a good investment for the Company at this time. Shares repurchased by the Company will be cancelled and returned to the status of authorized but unissued stock. From January 1, 1996 thru May 1, 1996, the Company has repurchased a total of 225,700 shares of common stock with an aggregate cost of $4,377,324 or an average price of $19.39 per share. As of May 1, 1996, 269,300 shares remain authorized for repurchase. The Company's primary use of funds is to purchase rental equipment, and funds will continue to be used for this purpose in the future. Additionally, the Company plans to make further improvements to the land at their inventory facility located Northern California. The Company also pays quarterly dividends, which will constitute an additional use of cash in 1996. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION On March 29, 1996 the Company declared a quarterly dividend on its Common Stock; the dividend was $0.14 per share. Subject to its continued profitability and favorable cash flow, the Company intends to continue the payment of quarterly dividends. The Company's loan agreement with its banks prohibits payment of dividends in excess of 50% of net income in any one year without the banks' consent. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. No exhibits included. (b) REPORTS ON FORM 8-K. No reports on form 8-K have been filed during the quarter for which this report is filed. McGrath RentCorp First Quarter 1996 Form 10-Q Page 7 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 thereunto duly authorized. Date: May 1, 1996 McGRATH RENTCORP By: /s/ Delight Saxton ___________________________ Delight Saxton Vice-President of Administration, Chief Financial Officer and Secretary