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

Source: McGrath RentCorp